US stocks faced a setback on Thursday, with the S&P 500 and Dow Jones Industrial Average pulling back from record highs as investors reacted to new inflation data. The Consumer Price Index (CPI) report showed that inflation remained slightly hotter than expected, raising concerns about the Federal Reserve’s approach to future rate cuts. While tech stocks provided some support, broader market sentiment was cautious, leading to mixed performances across sectors and regions.

Key Takeaways:

  • S&P 500 and Dow Retreat from Record Highs: The S&P 500 declined 0.21% to close at 5,780.05, while the Dow Jones Industrial Average fell by 57.88 points, or 0.14%, ending at 42,454.12. The pullback came as investors digested a hotter-than-expected CPI report, stoking fears of persistent inflation and its potential impact on future Federal Reserve policy. This pressure contributed to the broader sell-off, particularly in small and mid-cap stocks, which are seen as more sensitive to interest rate changes.
  • Nasdaq Holds Ground Amid Tech Optimism: The Nasdaq Composite edged down 0.05%, finishing at 18,282.05. Despite the overall market downturn, the index remained relatively stable thanks to continued interest in tech stocks, with anticipation building around Tesla’s upcoming robotaxi event and advancements in AI capabilities. While the broader market faced pressure from the CPI report, the tech sector showed resilience, with investors selectively supporting stocks with strong innovation narratives.
  • Inflation Remains Stubborn as Jobless Claims Rise: September’s Consumer Price Index (CPI) increased by 0.2% month-over-month, pushing the annual inflation rate to 2.4%, above the expected 2.3%. Core inflation, which excludes volatile food and energy prices, rose 0.3% for the month, bringing the core annual rate to 3.3%. Meanwhile, weekly initial jobless claims surged to 258,000, the highest since August 2023, up by 33,000 from the previous week. The jump was largely attributed to disruptions from Hurricane Helene and a strike involving 33,000 Boeing workers, adding to concerns over potential softness in the labour market despite the overall job growth earlier in the month.
  • European Markets React to US Inflation Data: European markets followed Wall Street’s lead, with the pan-European Stoxx 600 dropping 0.18% as investors weighed the implications of higher-than-expected US inflation. The FTSE 100 fell 0.07% to close at 8,237.73, while Germany’s DAX declined 0.23%. The CPI report added to the cautious mood, compounding existing concerns over Germany’s forecasted two-year recession, the first in nearly two decades. Shares in the insurance sector gained 1.06%, lifted by expectations of higher premiums following Hurricane Milton, while tech stocks across Europe slipped by 1%, reversing some of their earlier gains.
  • Asian Markets End Higher Amid Hopes of Fiscal Stimulus: Asia-Pacific markets closed higher on Thursday, ahead of the US inflation report. Japan’s Nikkei 225 gained 0.26% to close at 39,380.89, while the CSI 300 in China advanced 1.06% to 3,997.78, supported by optimism surrounding potential government measures to stabilise the economy. China’s central bank opened applications for a new liquidity tool, worth 500 billion yuan ($70.7 billion), aimed at easing pressures on the stock market. Meanwhile, Hong Kong’s Hang Seng Index jumped 3% as investor sentiment improved following a recent pullback. 
  • 10-Year Treasury Yield Climbs as Investors React to CPI Data: The yield on the 10-year Treasury note rose 1 basis point to 4.077%, briefly surpassing the 4.10% mark earlier in the session. Investors responded to the CPI report and comments from Federal Reserve officials, reflecting uncertainties around future rate cuts. This rise in yields highlighted market concerns about inflation remaining above target, which could influence the Fed’s decision-making at its upcoming policy meeting.
  • Oil Prices Jump Over 3% on Supply Concerns: Brent crude rose 3.32% to close at $79.12 per barrel, while West Texas Intermediate crude increased 3.21% to settle at $75.59 per barrel. The gains were driven by a spike in US fuel demand ahead of Hurricane Milton, which has caused significant disruptions in Florida, including power outages for over 3.4 million homes and businesses. Additionally, geopolitical risks following Iran’s missile strikes on Israel have kept oil markets on edge, with investors wary of potential impacts on Middle Eastern oil supply routes.

FX Today:

  • EUR/USD Rebounds, but Downtrend Persists: EUR/USD found support near 1.0928, ending the session slightly higher after dipping earlier in the day. The pair managed to stay above the 200-period SMA, which is currently around 1.1082, providing some cushion against further declines. Despite the bounce, the price remains pressured by the 50-period SMA at 1.1008, signalling continued bearish momentum. Traders are weighing the impact of recent Eurozone data against a slightly weaker USD. If EUR/USD can sustain gains above the 50-period SMA, it may aim for a recovery toward the 1.1050 mark. However, a drop below the 200-period SMA would open the door for further losses, with key support levels around 1.0850. Resistance stands at 1.1008 (50-period SMA), while 1.1082 (200-period SMA) serves as critical support.
  • GBP/USD Holds Near Key Support as USD Softens: GBP/USD ended the session at around 1.3055, recovering slightly after testing support levels. The pair found buying interest near the 200-period SMA, positioned around 1.3197, though it struggles to regain momentum. The 50-period SMA at 1.3162 remains a challenge for bulls. Despite a softer USD, cautious sentiment persists among traders. A break above the 50-period SMA could target resistance at 1.3200 and 1.3250. However, if the pair fails to hold above 1.3050, a renewed test of the recent lows around 1.3000 might come into focus, with bears eyeing a deeper push toward 1.2900.
  • USD/CHF Faces Resistance Amid Mixed Sentiment: USD/CHF traded near 0.8565 after struggling to break above recent resistance levels. The pair rebounded from its lows around 0.8500, supported by the 200-period SMA near 0.8486, but the 100-period SMA at 0.8533 has kept further advances in check. The market remains mixed, with USD attempting to regain footing after recent weakness. A clear break above the 100-period SMA could pave the way for further recovery toward 0.8600. Conversely, if USD/CHF falls back below the 200-period SMA at 0.8486, it could face additional selling pressure, with key support near 0.8400.
  • AUD/USD Sees Mild Recovery, Faces Resistance: AUD/USD traded around 0.6733 after rebounding from recent lows. The pair found support near the 200-period SMA at 0.6780, which has provided a stabilising influence. However, the pair remains below the 50-period SMA at 0.6809, indicating limited bullish momentum. The Australian Dollar’s recent movements reflect cautious market sentiment, with global economic developments closely monitored. A move above the 50-period SMA could target further resistance at 0.6850, while a decline below the 200-period SMA may increase bearish pressure, with key support around 0.6700 and 0.6650.
  • Gold Recovers as Inflation Concerns Linger: Gold prices rose 0.67% during Thursday’s session, trading around $2,629.56 after a hotter-than-expected US inflation report prompted renewed buying interest in the precious metal. Despite this, recent hawkish comments from Federal Reserve officials tempered further gains. Gold bounced from lows near the 200-period SMA around $2,578.97, indicating solid support levels. The price remains capped below the 50-period SMA at $2,641.40, which continues to limit upside potential. A sustained break above $2,641.40 could push gold toward the next resistance at $2,660. Conversely, a dip below the 200-period SMA at $2,578.97 might see support tested around $2,550, with deeper downside risks targeting the $2,520 level.

Market Movers:

  • First Solar Slips on Jefferies Downgrade: Shares of First Solar fell 9.3% after Jefferies lowered its price target, citing expectations of disappointing third-quarter results. 
  • Celsius Holdings Surges on Positive Analyst Commentary: Energy drink maker Celsius Holdings jumped 14.4% following favourable commentary from multiple research firms. 
  • 10x Genomics Plummets After Revenue Miss: 10x Genomics saw its stock price plunge 24.7% after announcing third-quarter revenue expectations of $151.7 million, representing a 1% decline from the same period last year. 
  • GXO Logistics Rallies on Sale Speculation: GXO Logistics shares soared 14.1% after reports emerged that the company is exploring a potential sale. Sources cited by Bloomberg indicated that GXO is working with financial advisors, though no final decision has been made. 
  • Advanced Micro Devices Falls on AI Chip Launch: AMD shares dropped 4% after the company unveiled a new AI chip designed to compete with Nvidia’s offerings. Despite the innovation, investors remained cautious about AMD’s ability to gain market share in the competitive AI hardware space, leading to a sell-off in the stock.
  • Enphase Energy Slips Amid Sector Weakness: Enphase Energy shares declined 5.8%, mirroring broader weakness in the solar sector following First Solar’s price target cut. The stock’s decline came as analysts warned of ongoing supply chain issues and sector-specific challenges, leading to a broader sell-off among renewable energy stocks.

As the trading session concluded, US markets faced with the impact of hotter-than-expected inflation data, which fuelled uncertainty about the Federal Reserve’s next policy moves. The S&P 500 and Dow pulled back from recent highs, while the Nasdaq managed to remain relatively stable amid confidence in the tech sector. European markets mirrored the cautious sentiment from Wall Street, with declines across major indices as investors digested the implications of the latest CPI report. Meanwhile, Asian markets closed higher, lifted by hopes for additional fiscal support in China. With the unexpected rise in jobless claims adding to concerns over economic resilience, all eyes remain on how the Fed will balance inflation management with growth concerns in its upcoming policy decisions.