Nasdaq 100 and S&P 500: Inflation Risks Weigh on U.S. Stock Market

Major Indices Pause as Traders Digest Mixed Economic Data

U.S. equity markets edged lower on Thursday following Wednesday’s strong gains, with the S&P 500 losing 0.3% and the Nasdaq dipping 0.5%. The Dow Jones Industrial Average was nearly flat, declining 0.1%. Traders grappled with a mixed bag of economic reports and sector-specific developments, leading to modest profit-taking. Notably, the Nasdaq retreated after hitting a record high Wednesday, weighed down by tech losses. Economic data revealed an uptick in producer prices, while jobless claims rose unexpectedly, creating a complex backdrop ahead of next week’s Federal Reserve meeting.

Sector Performance Shows Diverging Trends

Sector-level movements reflected cautious sentiment. Seven of the S&P 500’s eleven sectors ended in the red, led by healthcare (-0.55%) and energy (-0.6%). Technology (-0.04%) also slipped, as heavyweight losses overshadowed modest gains elsewhere.

Meanwhile, defensive sectors such as consumer staples (+0.53%) and utilities (+0.41%) outperformed, benefiting from rotation into less volatile areas. Real estate (+0.37%) also gained, bolstered by improved sentiment toward rate-sensitive industries. Energy stocks underperformed as OPEC+ production decisions and broader commodity softness pressured oil prices.

Stock Highlights: Media Restructuring, IPO Success, and Activist Moves

Warner Bros. Discovery led individual stock gainers, surging 15% after announcing plans to separate its linear TV and streaming divisions. The restructuring is seen as a strategic shift to address challenges in legacy media.

Meanwhile, beverage giants Coca-Cola, PepsiCo, and Keurig Dr Pepper all rose over 1% after Deutsche Bank upgraded the group, citing improving restaurant trends and stronger consumer impulse buying heading into 2024.

ServiceTitan made headlines with a stellar Nasdaq debut, surging over 40% after its IPO priced above expectations at $71 per share. Riot Platforms jumped nearly 10% following news that activist investor Starboard Value acquired a significant stake and is advocating for diversification into data centers. Adobe fell 12% after issuing revenue guidance below analyst expectations, weighing heavily on the tech sector.

Economic Signals Cloud Rate-Cut Optimism

Economic data presented a mixed picture. Producer prices rose 0.2% in November, exceeding forecasts of 0.1%, suggesting persistent inflation risks. Conversely, cooling service costs signaled progress in disinflation, while weekly jobless claims unexpectedly rose to 230,000. Despite these mixed signals, traders remain confident in a 25-basis-point Fed rate cut next week, with CME’s FedWatch Tool pricing in a 98% probability.

Short-Term Market Outlook: Volatility Ahead as Traders Seek Direction

Markets are at a crossroads, with record highs in tech facing valuation pressures and uneven sector strength creating headwinds. A likely Fed rate cut next week may provide support, but persistent inflation and labor market uncertainty could weigh on sentiment. Expect continued sector rotation and elevated volatility, with traders closely watching earnings revisions and macroeconomic updates for near-term opportunities. Defensive and income-generating sectors may see sustained inflows as traders position for year-end stability.

More Information in our Economic Calendar.