Dow lower after paring losses in September’s volatile final session

The Dow industrials were lower Thursday afternoon, but off the worst levels of the day, while the Nasdaq Composite Index clawed back into positive territory.

Wall Street is aiming to wrap up the last trading day of a volatile September and the final session of the third quarter, while investors look to parse testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen, who appeared before the House Financial Services Committee.

How are stock-index futures trading?

For the month, the Dow was headed for a 2.4% decline, the S&P 500 was down 3.2% and the Nasdaq Composite was off 4.3%. For the quarter, the Dow was flat, the S&P 500 was up 1.9% and the Nasdaq Composite was up 0.8%.

What’s driving the market?

The Senate on Thursday approved a short-term spending bill to keep the federal government running through early December, sending the measure to the House with just hours remaining before a partial shutdown. Congress has yet to raise the federal debt ceiling though.

That effort comes as the House aims to pass a roughly $1 trillion infrastructure bill already passed by the Senate but which may be in doubt as Democratic factions are threatening to block the bill unless moderate members sign on to supporting a separate, broader bill focused on climate change, education, and healthcare.

The drop in stocks was in motion even as bond yields eased again with the 10-year Treasury

slipping 2.5 basis point to around 1.52%. The U.S. dollar, meanwhile, which has been in the spotlight as it charged to its highest level in about a year was steadying at 94.29, at last check.

Investors were also digesting fresh comments from Fed Chairman Jerome Powell, on inflation remaining high for the time being due supply bottlenecks as the economy recovers from the pandemic, as he testified to a House panel on COVID relief, along with Treasury Secretary Janet Yellen.

The Treasury Secretary at Thursday’s hearing reiterated that a failure to raise the debt limit would have catastrophic implications for markets and the U.S. economy.

Several other government officials are set to speak Thursday, including Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Chicago Fed President Charles Evans and St. Louis Fed President James Bullard.

On the data front, the number of people who applied for U.S. unemployment benefits in late September rose to a two-month high, but much of the increase took place in California. New jobless claims paid traditionally by the states rose by 11,000 to 362,000 in the seven days ended Sept. 25, the government said Thursday.

Economists polled by The Wall Street Journal had estimated new claims would total a seasonally adjusted 330,000.

“Though jobless claims ticked up yet again, weekly labor market data can be tricky to digest just because there is a lot of it and it’s certainly bounced around a lot throughout the pandemic,” wrote Mike Loewengart, managing director investment strategy at E-Trade Financial, in emailed remarks.

“The end of Federal pandemic unemployment benefits earlier in the month also likely drove an increase in filings for state benefits. So the market may take this one piece of the data in stride as we wait for the reads next week, especially since the big ticket item right now is the debt ceiling,” Loewengart wrote.

Meanwhile, an updated reading of second-quarter growth showed that the U.S. economy grew at a 6.7% annual pace, as the U.S. got a big jolt in the spring from government stimulus payments and coronavirus vaccines allowed businesses to reopen. The rise in consumer spending was slightly faster at 12% and exports were revised to show a 7.6% increase instead of 6.6%

Separately, a measure of business conditions in the Chicago region slipped in September to the lowest level in seven months, a trade group said Thursday. The Chicago Business Barometer, also known as the Chicago PMI, slowed to 64.7 in September from 66.8 in the prior month. The index has been moderating from a record high of 75.2 in May.

Which companies are in focus?
How are other assets trading?
  • The 10-year Treasury note

     was yielding 1.53% little changed from its Wednesday level.

  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was flat, holding at 94.29, the highest level in about a year.

  • Oil futures eased back, with the U.S. benchmark

    dropping 1.7% to $73.49 a barrel, while international benchmark Brent

    declined 1.5% to $76.97.

  • In European equities, the Stoxx Europe 600 index

    traded 0.2% lower and the FTSE 100 index

    pulled back 0.3%. In Asia, the Nikkei 225 index

    slipped 0.3%, the Hong Kong Hang Seng Index

    slipped 0.3% and China’s CSI 300 index

    rose 0.6%.

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