Industrials, transports weighed down by data, hawkish Fed
Main U.S. indexes now all red; red: Dow off ~0.7%
Industrials weakest S&P sector; Tech leads gainers
Dollar, up; crude slips; gold down ~1%; bitcoin off >2%
U.S. 10-Year Treasury yield falls to ~4.24%
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INDUSTRIALS, TRANSPORTS WEIGHED DOWN BY DATA, HAWKISH FED
Industrials .SPLRCI are among the weakest S&P 500 .SPX sectors on Thursday while the Dow Transports .DJT was falling harder as investors favor technology stocks while they worry about the impact weak producer price data, and buckle down for the impact of higher-for-longer interest rates on more traditional industries.
Tim Ghriskey, senior portfolio manager at Ingalls & Snyder in New York also highlighted weakness in energy .SPNY, which jostled with industrials for the biggest loser crown among S&P sectors.
"The weakness today in industrials and transport stocks and energy can be tied to disinflation in the producer price index which mirrors the Fed dialing back rate easing projections for 2024 and 2025," said Ghriskey.
The money manager noted that easing rates "encourages more construction and building" which would help sectors like industrials and transports and energy.
"We've been in the camp for a while that the Fed was going to be in no hurry to lower rates. Powell did tip his hat to say rates are above normal. That means they're definitely going to come down but, they're waiting."
Meanwhile technology is outperforming the broader market on Thursday with chip makers among the biggest gainers suggesting to Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas that investors are likely rotating money out of industrials and into technology as they looking to benefit from up-and-coming trends such as artificial intelligence.
"Money continues to pour into the tech space and that trend is probably going to continue. Perhaps you have rotation out of industrials into tech," said Bradshaw. "I'm an AI bull. I think its real. We don't know exactly how its going to pan out. It's like going back to 1999 with the internet."
However, even as higher rates may stunt some construction projects, Bradshaw said that he was watching data centers being built all around him as tech companies look to take advantage of runaway demand for AI services.
Industrials are last down around 1.25% while energy is down about 1.1% and the DJT is off 1.5%. Caterpillar CAT.N and Boeing BA.N are among the Dow Industrials' .DJI biggest decliners, both off >1%.
(Sinéad Carew)
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