S&P 500 off lows, but Fed fears keep up pressure

By Yasin Ebrahim

Investing.com -- The S&P 500 fell Thursday, weighed down by disappointing quarterly results and rising Treasury yields after data pointing to a still-hot labor market is expected to keep the Federal Reserve on a hawkish path.

The S&P 500 fell 0.37%, the Dow Jones Industrial Average slipped 0.47%, or 157 points, and the Nasdaq Composite was down 0.54%.

Treasury yields continued their advance as fewer than expected initial jobless claims for the third-straight week pointed to a tight labor market that threatens to underpin wage growth and inflation.

About 190,000 people filed for unemployment benefits for the week ended Jan.14, well below economists' forecast of 214,000. It was the lowest since April.

“Data releases like this are why policymakers continue to reiterate their intention to raise rates,” Jefferies said.

Federal Reserve Governor Lael Brainard on Thursday insisted the Fed was “determined to stay the course" on monetary policy tightening, and would keep rates “sufficiently restrictive for some time" to ensure inflation returns to the central bank’s 2% target.

The remarks from the Fed vice chair on keeping rates higher for longer have added to concerns that the Fed could overtighten policy, tipping the economy into recession.

The earnings front, meanwhile, did little to allay those fears about the economy and the consumer.

Norwegian Cruise Line (NYSE:NCLH) health fell more than 4%, leading consumer stocks lower, after the cruise company warned that it expected to report a net loss for the quarter and full year.

Tesla (NASDAQ:TSLA) also added to downside momentum, falling 1%, as many worry the EV maker’s quarterly results could fall short of expectations amid slowing demand and disruption to productions in China.

Banking and insurance stocks, meanwhile, continued to pressure financials, paced by a slump in Northern Trust Corporation (NASDAQ:NTRS), Allstate Corp (NYSE:ALL), and Charles Schwab Corp (NYSE:SCHW).

Northern Trust Corporation reported fourth-quarter earnings that missed Wall Street estimates, sending its share price more than 8% lower. While SCWH fell 6% after Bank of America downgraded the stock to Underperform from Buy on worries the tailwinds including the boost from higher short-term interest are waning. 

In tech, investor focus shifted to Netflix (NASDAQ:NFLX) as the streaming giant is set to report quarterly results after the closing bell.

Netflix is expected to add about 4.5 million subscribers in Q4, up from 2.4M in the prior quarter, but down from 8.3M in Q4 last year.