US stock markets made little progress in Thursday's choppy session as investors digested economic data after a big rally in the previous session from US Federal Reserve signals that it would slow its interest rate hiking pace.
The US dollar index fell to its lowest level since August and Treasury yields sank after Fed Chair Jerome Powell said on Wednesday that it was time to slow rate hikes. He also pointed to a protracted economic adjustment to higher borrowing costs and a slow decline inflation as well as a chronic shortage of workers in the United States.
While oil futures settled well below their session highs, crude had risen sharply earlier in the session on the chance of further supply cuts by OPEC+ and as easing Covid curbs in China spurred hopes for higher demand from world's top crude importer.
While equity investors cheered signs of moderating inflation on Thursday and an increase in US consumer spending in October, risk appetites dimmed after data showed US manufacturing activity contracted for the first time in 2-1/2 years in November as higher borrowing costs weighed on demand.
Still investors saw easing inflation supporting the Fed chair's indication that rate hikes could slow. In the 12 months through October, the personal consumption expenditures (PCE) price index increased 6.0 percent after advancing 6.3 percent in September compared with the Fed's 2 percent target.
"We're in a little bit of a limbo after yesterday's huge rally. Investors are still digesting that and waiting on the payrolls data tomorrow," said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions. Friday's jobs report meeting or missing expectation could help stocks as it would give the Fed support for easing rate hikes.
"All asset classes are one big rates trade," he said. "We're seeing the setup as favourable for a rally through year end. The bias is still bearish. There's still a lot of investors who are under-risked. Yesterday was ripping the Band-Aid off worrying about Powell continuing to be hawkish and the ensuing scramble to get exposure."
The Dow Jones Industrial Average fell 0.6 percent to 34,395, the S&P 500 lost or 0.1 percent to 4,076 and the Nasdaq Composite added 0.1 percent to 11,482.
The S&P had rallied 3 percent on Wednesday after Powell's comments while Nasdaq had gained more than 4 percent and the Dow had risen 2 percent.
In commodities, earlier in the day oil prices had risen sharply ahead of the December 4 meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+.
Though sources had said on Wednesday that policy change is unlikely, some said that a further cut cannot be ruled out.
US crude settled up 0.8 percent at US$81.22 per barrel and Brent settled at US$86.88, down 0.1 percent on the day. (Reuters)