Main U.S. indexes slide: Nasdaq down nearly 3%
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All S&P 500 sectors red: cons disc weakest group
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Euro STOXX 600 index falls ~1.5%
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Dollar, gold, crude, bitcoin all decline
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U.S. 10-Year Treasury yield rises ~3.79%
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THURSDAY'S INDICATORS: TELL ME SOMETHING I DON'T KNOW (1115 EDT/1515 GMT)
Data released on Thursday sang a familiar refrain: first, the labor market is tight. And last, and by a common definition, the United States economy was in recession during the first half of the year.
The number of U.S. workers filing first time applications for unemployment benefits unexpectedly dropped by 7.7% last week to 193,000, according to the Labor Department.
The number landed below the 200,000 mark for the first time since early May, sinking beneath the lower end of a range associated with healthy labor market churn.
So the takeaway would appear to be the labor market is still suffering from a supply/demand imbalance.
With about two unfilled positions for every unemployed American, employers are loathe to hand out pink slips, a situation which would appear to imply upward wage pressure - a harbinger of systemic hot core inflation - is still alive and kicking.
"The labor market remains very tight, and the claims data do not show any signs that slack is emerging," writes Thomas Simons, money market economist at Jefferies. "If anything, the recent claims data suggest that the labor market is tightening up even more."
Indeed. Market participants are in a topsy-turvy "good news is bad news" mode. Robust labor market data shows the Fed's interest rate hikes, designed to lasso inflation by dampening demand, have yet to kick in. This could, in turn, prompt Powell & Co to dial up their hawkish policy game.
The four-week moving average, which irons out weekly volatility, dropped to 207,000, extending a downward trend that began in mid-August.
Ongoing claims, reported on a one-week lag, edged down 2% to 1.347 million.
The Commerce Department took its third and final swing at second-quarter GDP, reiterating its prior reading - in the April-June period, the U.S. economy shrank by 0.6% on a quarterly annualized basis.
Peeking under the hood, the most welcome news came from consumer spending growth, which accounts for nearly 70% of U.S. economic activity, was upwardly revised to 2% from 1.3%.
Among other contributors, private inventories and fixed investment - which includes residential construction and infrastructure - detracted 1.9 and 0.9 percentage points (ppt) from the topline, respectively.
Robust exports added 1.5 ppt to the plus column, edging out the 1.4 ppt contribution from consumer expenditures as the biggest contributor.
The series was also revised back to the last quarter of 2016, which revealed a substantially more robust recovery from the pandemic recession, the steepest and most abrupt economic plunge in U.S. history.
"Looking ahead, we expect positive but below-potential growth in the second half of the year," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "But there are substantial downside risks, from a rapid pace of Fed rate hikes."
Wall Street was tanking in morning trading, forfeiting Wednesday's solid gains and then some.
Every sector and asset class was deep read, with consumer discretionary and chips plummeting further than most.
STORM STOCKS TO WATCH IN IAN'S AFTERMATH (1040 EDT/1440 GMT)
Jefferies issued a research note late Wednesday summarizing the impact of Hurricane Ian on its multi-industrials coverage.
More than 2.4 million homes and businesses in Florida were without power early on Thursday, and Ian is expected to produce strong winds, heavy rains and storm surge, including in Georgia and the Carolinas, the U.S. National Hurricane Center said.
Jefferies called Generac Holdings Inc a "storm stock," saying it should see some increased demand as power disruptions increase awareness of generators. The company typically sees a demand bump 6-12 months following a major event. This was illustrated in Texas following Winter Storm Uri in 2021, when Generac saw an approximate 3x increase in the number of in-home consultations, the analysts wrote.
Evoqua Water Technologies Corp's mobile fleet will see increased demand as extreme weather events disrupt the water supply. "This is especially true for slower moving hurricanes, which tend to deliver more water and thus require more clean-up work associated with wastewater," Jefferies said.
There will also be higher demand for water removal, Jefferies said, highlighting that Xylem Inc's dewatering business accelerated over the course of two quarters following Hurricane Sandy.
With respect to HVAC (heating, ventilation, and air conditioning), A.O. Smith could see more demand for water heaters damaged by flooding, Jefferies said, adding that Watsco Inc has a significant HVAC distribution footprint in Florida.
When it comes to pool repair, Hayward Holdings Inc and Pentair PLC could see more demand for equipment and parts, while Pool Corp cited 1-2 points of revenue growth following the Texas storm, according to Jefferies.
Ian's wrath will certainly be felt across a wide variety of sectors in the coming weeks as the damages are assessed.
Lance Tupper
U.S. STOCKS: THE RED TIDE COMES BACK IN (0946 EDT/1346 GMT)
U.S. stocks are lower early on Thursday as worries of a global economic downturn from aggressive central bank rate hikes and risks of potential contagion from a turmoil in UK markets is once again turning investors risk averse.
With this, the main U.S. indexes are down 1.5% or more, with the Nasdaq taking the biggest hit. Small-caps, FANGs and chips are even weaker.
All S&P 500 sectors are red with consumer discretionary off the most. Defensive groups are seeing the smallest declines.
Meanwhile, after taking a big hit on Wednesday, the U.S. 10-Year Treasury yield is trying to find its footing. It is up from a close of around 3.71% to around 3.80%.
That said, after rising to around 3.87% earlier, it has so far stalled well shy of Wednesday's 4.0190% high. Traders are eying action vs last week's close at 3.6970% for signs weekly momentum may finally be cracking - click here:
Here is a snapshot of where markets stood shortly after the open:
NASDAQ COMPOSITE: WHEEZING, BUT TRYING TO CATCH ITS "BREADTH?" (0900 EDT/1300 GMT)
In a testament to just how weak the Nasdaq has been, on Monday of this week, the Nasdaq McClellan Oscillator (McOsc), a breadth/momentum measure based on the raw data for net advancing issues, plunged to an all-time low.
That said, the total number of issues traded over time has not been constant, and with the advent of decimal pricing in 2001, the number of unchanged issues has fallen.
We can create a normalized, or ratio-adjusted (RA) McOsc, by dividing net advancing issues by the total number of advances plus declines. Therefore, it allows us to better compare readings over a long period of time, and assess historically overbought or oversold levels.
On Monday, the RA-McOsc, plunged to -98.3, which was the 14th lowest reading in its history using Refinitiv data back to mid-1995:
There have now been a total of 6,841 trading days (tds) over this time frame, so although not the lowest reading ever as logged by the raw data version of the indicator, it still showed an eye-popping degree of weakness, while potentially signaling a market at, or near, washed-out levels.
Monday's reading was the lowest since a -102.4 reading on March 16, 2020, which was just five trading days ahead of the Nasdaq's March 23, 2020 pandemic crash low. The all-time low reading for this measure occurred at -123.8 on March 12, 2020, seven trading days ahead of the low for that swoon.
Additionally, of note, Monday's reading was essentially equal to the Dec. 24, 2018, reading of -98.7, which marked the day of the Nasdaq's low for that decline.
The measure has improved by vaulting to -35.86 as of Wednesday close. That said, ideally, bulls want to see a "breadth-thrust" develop to add confidence in the sustainability of a turn.
Looking back from 2009 to 2020, RA-McOsc thrusts back above +80 developed in the wake of major lows in 2009, 2010, 2011, 2016, 2018 and 2020.
In the event the Nasdaq does end below Monday's 10,802.922 close, traders will eye the RA-McOsc to see how it behaves. It formed a bullish convergence into the March 2020 market trough, as well as the more recent June low.
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE: