Stocks in the US dropped again on Thursday as recession fears gripped the market after the passing relief of the last trading session. It was triggered by the Bank of England’s decision to buy government bonds.
Major Indexes Drop
The S&P 500 index dropped by 1%early in the session, the Dow dropped by 0.8% or 200 points, and the Nasdaq composite index lost 1.4%.
For economic data, the initial jobless reports also dropped to 193,000 in the week ending on the 24th of September, which is the least figure since April. It came from a downward review of 213,000 the week before, according to the Department of Labor. Economists initially forecasted 215,000 as seen in the consensus estimate.
Also on the economic front, a third reading on the GDP from the Department of Commerce shows that economic activities in the US plummeted by 0.6% on an annual basis.
Shares of CarMax fell by 14% following a report of the vehicle buyer’s Q2 earnings that fell below the market estimate. The company cited the challenge of customer affordability being what weighed down sales.
Bed Bath and Beyond equally dipped on Thursday. This followed posting a broader loss for the quarter as continuous selling and inventory chaos and inflation pressure struck the retailer. Its shares dropped by about 2%.
BOE Intervention
The new market’s risk-off sentiment put the three leading averages on momentum to lose their gains that were secured after the Bank of England announced on Wednesday that it was going to buy government bonds. It was the bank’s way of stepping in to stabilize the money market. Investors in the UK lauded the move of the BOE from hawkish policies in recent times.
The three major indexes, the Dow, S&P 500, and Nasdaq all managed about a 2% rally each on Wednesday.
The Chief Economist at EY Parthenon, Gregory Daco, mentioned that the lack of the right policy management alongside the momentum of interest rate increments poses the risk of a disorderly and excessive monetary policy tightening. He said further that the economic condition of the UK has become worse since the PM released her budget and plan. The country’s treasury yields have risen to the highest in 12 years while the Pound fell to its lowest point in more than 30 years, he said.
After the Bank of England’s intervention on Wednesday to buy about £65 billion worth of long bonds, the thirty-year bonds fell by 100 basis points after it was at a twenty-year high. But Treasuries yields in the US went higher after they rose at the fastest rate in decades.