How stocks are trading

S&P 500
SPX,
-0.92%
shed 53 points, or 1.4%, to 3,737.

Dow Jones Industrial Average
DJIA,
-1.03%
was down 470 points, or 1.5%, to 30,310, after retreating more than 600 points earlier.

Nasdaq Composite
COMP,
-0.75%
shed 130 points, or 1.1%, to 11,121.

On Wednesday, the Dow
DJIA,
-1.03%
fell 209 points, or 0.7%, while the S&P 500
SPX,
-0.92%
declined 0.5% and the Nasdaq Composite
COMP,
-0.75%
dropped 0.2%.

What’s driving markets

Federal Reserve rate hike worries continued to reverberate Thursday as traders priced in a 75% probability that Chairman Jay Powell and colleagues would raise the Fed’s benchmark interest rate by 100 basis points in less than two weeks time as they try to crush inflation, which jumped above 9% to a 41-year high in June, according to the consumer-price index released Wednesday.

Federal Reserve Governor Christopher Waller on Thursday said he supports a 0.75 percentage point interest rate hike in July, but he left the door open for a larger move if data over the next two weeks comes in strong. His comments come one day after Atlanta Fed President Raphael Bostic said “everything is in play”.

Thursday’s economic data releases gave investors another look at inflation, as the producer price index climbed 1.1% in June, bringing the headline rate for the past 12 months to a new cycle high of 11.3%. This marks a new cycle high, and is close to the highest level on record for the gauge of wholesale prices, which are seen as a leading indicator for inflation as they are eventually passed down to consumers.

There was one silver lining, however: If food and gas and trade margins were omitted, so-called core producer prices rose just 0.3% in June. This caused the annualized rate to slow to 6.4% in June, down from 6.7% during the prior month.

Richard Saperstein, chief investment officer at Treasury Partners, said the latest inflation data underscored his fears that the Fed won’t be able to tackle inflation without driving the U.S. economy into a recession, which could lead to more losses for stocks.

“We remain skeptical that the Fed can pull off simultaneously normalizing its balance sheet, controlling inflation, and avoiding severe market disruptions,” Saperstein said in emailed commentary. “We’re increasingly concerned that investors may be forced to endure more downside volatility in this tricky environment.”

In addition, the second-quarter earnings season began in earnest on Thursday with disappointing reports from JPMorgan Chase
JPM,
-3.61%
and Morgan Stanley
MS,
-0.49%.
The weak numbers added to fears about slowing growth for corporate profits.

But it wasn’t just weaker-than-expected earnings-per-share that caused bank stocks to sink: Analysts blamed JPM’s decision to suspend stock buybacks, along with the deepening inversion of the Treasury yield curve, for weighing on shares of American money-center banks.

“A lot of it came from Jamie Dimon and the fact that JP Morgan is walking away from stock buybacks and seemingly wants to horde cash. This is an indication that they’re preparing for a rough go in the economy, and that sentiment is spilling over to the other banks, along with the inverted yield curve,” said Paul Nolte, portfolio manager at Kingsview Asset Management.

In other data, weekly jobless claims showed more Americans applying for benefits than at any time since November 2021.

Energy stocks were the worst performers among the S&P 500’s 11 sectors on Thursday, down 3.9%, followed by materials — down 2.7% — and financials, down 2.6%.

Stocks in focus

Shares of the largest American banks traded sharply lower on Thursday following the earnings from Morgan Stanley and JPM, whose shares were down 1.4% and 4%, respectively. Goldman Sachs Group Inc.
GS,
-3.00%
shares were down 3.5%, Citigroup Inc.
C,
-3.54%
was down 4%, Bank of America Corp.
BAC,
-2.33%
was down 2.9% and Wells Fargo & Co.
WFC,
-1.46%
was down 2.2%.

Conagra Brands Inc. was the worst performer on the S&P 500 early Thursday, with its shares down more than 8%.

APA Corp.,
APA,
-4.89%
EOG Resources Inc.,
EOG,
-4.49%
Diamondback Energy Inc.,
FANG,
-4.06%
Marathon Oil Corp.
MRO,
-3.74%
and Halliburton Company
HAL,
-4.36%
were all down sharply as shares of oil and gas stocks responded to falling oil prices.

Other markets

Wall Street’s choppy session overnight left most Asian and European bourses displaying little risk appetite. The Stoxx 600
SXXP,
-1.48%
in Europe lost 1.8% and Hong Kong’s Hang Seng
HSI,
-0.22%
fell 0.5%. The Nikkei 225
NIK,
+0.62%
in Japan bucked the trend and managed a 0.6% gain.

West Texas Intermediate crude futures
WBS.1,
-3.48%
were down 2.5% to $93.89, the lowest level since just after Russia launched its invasion of Ukraine in late February, as signs of slowing economic growth weighed on industrial commodities.

The spread between 2-year
TU00,
-0.00%
and 10-year Treasury yields
TY00,
-0.35%
inverted even further, reaching levels unseen in almost 22 years at minus 26 basis points.

After coming within a hair’s breadth of it earlier in the week, the U.S. dollar
EURUSD,
-0.21%
finally reached parity with the euro, trading at 1.00 Thursday morning.

Bitcoin
BTCUSD,
+3.04%
is up 1.6% to $19,978, recovering some ground after crypto lender Celsius filed for bankruptcy.