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Stocks retreat from rally as Fed doubts creep in

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US stocks pulled back on Thursday, losing grip of gains from this week’s soaring rally as investors started to question the idea the Federal Reserve is poised to pivot away from interest-rate hikes.

Futures on the Dow Jones Industrial Average (^DJI) dropped 0.2%, while benchmark S&P 500 (^GSPC) futures slipped 0.2%. Contracts on the tech-heavy Nasdaq 100 (^NDX) fell over 0.3%.

Stocks have climbed as investors became more convinced that cooling inflation is signaling to Fed policymakers that their work is done and they can ease back on tightening. The Dow has risen for four days in a row and closed Wednesday at its highest level since August.

Some on Wall Street now wonder whether market is overdoing its expectations of a shift, given the consumer resilience shown in Wednesday’s retail data and Target (TGT) earnings. Pimco CIO Daniel Ivascyn warned there was “too much enthusiasm” about rate cuts, saying “the inflation problem is far from being solved.”

Walmart (WMT) reported quarterly earnings that topped estimates and raised its annual outlook, though by slightly less than expected. Its shares fell more than 7% in pre-market trading. Meanwhile, Macy’s (M) stock jumped 10% after the department store’s profit beat expectations as freight costs improved.

The market was also assessing President Joe Biden’s high-stakes meeting with China’s Xi Jinping, which wrapped Wednesday with the US leader welcoming progress in rebuilding ties between the superpowers. But economic differences remain, and Biden again described Xi as a “dictator.” China stocks declined Thursday, with at least one analyst attributing the moves in part to Biden’s remark.

On the economic docket, the weekly update on US jobless claims will be watched for any surprises.

  • Stock futures retreat as retail earnings roll in

    US stocks lost ground before the bell on Thursday as Wall Street questioned the market’s confidence that the Federal Reserve will ease its tightening, as big retailers Walmart and Macy’s posted their quarterly results.

    Futures on the Dow Jones Industrial Average (^DJI) fell 0.23%, or 81 points, while S&P 500 (^GSPC) futures shed 0.20%. Contracts on the tech-heavy Nasdaq 100 (^NDX) fell 0.36%.


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