US: Wall Street retreats from record closing highs as economic worries mount

[NEW YORK] US stocks closed lower on Tuesday (Oct 7) as investors, deprived of economic data resulting from the shuttered government, looked to secondary indicators and remarks from US Federal Reserve officials for clues regarding economic weakness and monetary policy.

All three indexes ended in negative territory after a consumer expectations survey from the New York Federal Reserve showed deteriorating future expectations and rising inflation projections. The report garnered increased scrutiny amid a federal data blackout resulting from a partisan congressional impasse that extended the government shutdown to its seventh day.

Investors have had to rely on secondary, independently produced data, along with remarks from monetary policymakers, to gauge the likelihood that the Federal Reserve will implement its second rate cut of the year at this month’s policy meeting.

“The New York Fed report probably gave traders an excuse to take some profits since the S&P had been up for seven days in a row,” said Sam Stovall, chief investment strategist of CFRA Research in New York. “There is an awful lot of uncertainty the longer the government remains shut down because of the absence of any economic data.”

Economically sensitive sectors, including homebuilding, housing, airlines, and transport underperformed the broader market.

“The market is still very much centred on artificial intelligence (AI) driving everything, and I think some of the bloom is off the rose,” said Paul Nolte, senior wealth adviser & market strategist at Murphy & Sylvest in Elmhurst, Illinois. Fed governor Stephen Miran stated his case for continued rate cuts, stressing the risks of keeping policy too restrictive.

According to preliminary data, the S&P 500 lost 25.69 points, or 0.38 per cent, to end at 6,714.59 points, while the Nasdaq Composite lost 153.30 points, or 0.67 per cent, to 22,788.36. The Dow Jones Industrial Average fell 91.99 points, or 0.2 per cent, to 46,602.98.

Tesla shares extended their losses after the electric carmaker unveiled its low-cost Model Y. AMD advanced after Jefferies upgraded the stock rating to “buy” and other brokerages hiked their price targets the day after the chipmaker’s supply deal with OpenAI bolstered the tech rally.

Corona beer maker Constellation Brands gained after posting a smaller-than-expected drop in second-quarter sales. IBM rose after the company announced a partnership with AI startup Anthropic. US-listed shares of Trilogy Metals soared after the White House said that it would acquire a 10 per cent stake in the company.

SEE ALSO

AppLovin surged, recouping nearly half of its losses from the prior session, and topped the S&P 500 after brokerages Citi Research and Oppenheimer allayed concerns after a report on a US Securities and Exchange Commission probe into its data collection practices.

Bitcoin-related stocks, including Coinbase, Strategy, Riot Platforms, and Mara Holdings, reversed on Monday’s gains as the cryptocurrency backed away from record highs. REUTERS