By Yasin Ebrahim
Investing.com -- The S&P 500 slipped for a second-straight day Thursday as Federal Reserve officials continued to call for further rate hikes, stoking concerns about a deeper recession.
St. Louis Federal Reserve President James Bullard insisted that rate hikes need to be increased further to reach a “sufficiently restrictive level” to cool inflation.
Bullard, who tends to lean hawkish, suggested the Fed’s benchmark rate would need to rise to a 5% to 7% range.
Signs that the job market remains resilient - as weekly jobless claims fell short of expectations – strengthened the prospect of a more hawkish Fed and stoked renewed concerns about a Fed-induced recession.
“We had thought that last week's increase might have been the start of a gradual move to higher levels, but there was no follow-through this week. Instead, claims remain in the historically low range that has held since mid-August,” Jefferies said in a note.
A key part of the Treasury yield curve, the 10-year yield over the two-year yield, inverted – a key recession indicator – by the most since 2019.
Consumer stocks led the broader market move lower, pressured by a more than 4% slump in Norwegian Cruise Line after Credit Suisse downgraded its rating on the cruise stock to underperform from outperform, citing valuation concerns.
Norwegian Cruise Line (NYSE: NCLH ) “has outperformed materially YTD and we see risk to estimates/valuation vs peers,” Creidt Suisse said. Royal Caribbean Cruises Ltd (NYSE: RCL ) and Carnival Corporation (NYSE: CCL ) fell more than 4% and nearly 2%, respectively.
Retailers including Bath & Body Works (NYSE: BBWI ) and Macy's helped soften the blow in consumer stocks.
Bath & Body Works rallied more than 14% after reporting blowout earnings in the third quarter and raising its outlook on the full year. The stronger results were “due largely to a better merchandising margin rate and SG&A expense favorability,” Goldman Sachs said in a note.
Following the slew of earnings seen so far, and in the midst of the volatile macro environment, Goldman Sachs said it favored consumer staples-oriented retailers including Walmart Inc (NYSE: WMT ), McDonald’s Corporation (NYSE: MCD ), Constellation (NYSE: STZ ), and Monster Beverage Corp (NASDAQ: MNST ), against discretionary names including Williams-Sonoma Inc (NYSE: WSM ).
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