Wall Street ends lower after rally as earnings, data eyed

NEW YORK (Reuters) -U.S. stocks dipped on Thursday as a jump in the prior session cooled, while investors eyed the most recent corporate earnings and gauged economic data to determine the path of Federal Reserve rate cuts.

A benign reading on inflation calmed fears about a renewal in price pressures and strong bank earnings helped the three major U.S. indexes notch their biggest one-day percentage gain since Nov. 6 on Wednesday.

Economic data on Thursday indicated consumer spending remains strong, while the labor market is also on solid footing, given the Fed’s cushion to keep a slow pace in cutting interest rates this year.

“The market breathed a pretty good sigh of relief yesterday. Now January’s undecided, but at least on a little bit better footing to see where we end up, and we can look at some more data and some earnings and see how that’s all going to turn out,” said Rick Pitcairn, chief global strategist at Philadelphia-based Pitcairn.

“The bank earnings have been strong, and those are bellwether earnings, and to the extent that you’ve got a steepening yield curve, you’ve got some strong earnings come out of the banks, they’re looking forward and not talking their numbers down. The market’s taken a little courage from that.”

Morgan Stanley advanced after the lender said earnings increased in the fourth quarter, propelled by a wave of dealmaking, while Bank of America shares declined. The country’s second-largest bank predicted higher interest income in 2025.

According to preliminary data, the S&P 500 lost 12.53 points, or 0.21%, to end at 5,937.53 points, while the Nasdaq Composite lost 173.32 points, or 0.89%, to 19,337.92. The Dow Jones Industrial Average fell 65.53 points, or 0.16%, to 43,152.95.

Investors also focused on comments from Fed Governor Christopher Waller, who said the central bank could cut rates sooner and faster than expected as inflation is likely to continue to ease, which helped push Treasury yields lower.

The yield on the 10-year Treasury note was last down about 5 basis points (bps) and rate futures were pricing in a greater chance for the Fed to cut rates by at least 25 bps at the central bank’s May meeting.

Stocks have struggled following a post-U.S. election rally, with the S&P 500 falling in four of the previous five weeks, but are on pace currently for a weekly gain. A resilient economy, nagging inflation and comments from Federal Reserve policymakers have fanned worries about the central bank being less aggressive in cutting interest rates than previously anticipated.

Concerns linger about potential tariffs from President-elect Donald Trump, scheduled to take office on Monday, that would further stoke inflation.

Trump’s pick for Treasury Secretary, Scott Bessent, said the dollar should remain the world’s reserve currency, the Federal Reserve should stay independent, and that he is ready to impose tougher sanctions on Russia’s oil sector, while warning of an “economic calamity” if Trump’s 2017 tax cuts expired at the end of this year.

UnitedHealth fell and weighed heavily on the Dow after the health insurer reported fourth-quarter revenue below estimates.

(Reporting by Chuck Mikolajczak, additional reporting by Johann M Cherian, Medha Singh, Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Aurora Ellis)

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