Stocks Fall After Jobless Claims, Inflation Data

Trading has been choppy in recent days as investors consider the path forward for stocks. The S&P 500 closed Wednesday off 1.5% from its record after gaining 27% last year.

Investors are keeping a close watch on any developments that could affect the Federal Reserve’s calculations about tightening monetary policy to counter inflation. Central bank officials have signaled that an interest-rate rise could come as soon as March. The Fed’s James Bullard said Wednesday that four rises were likely in 2022. 

Federal Reserve governor Lael Brainard told Congress on Thursday that efforts to reduce inflation are the central bank’s “most important task.” Ms. Brainard is the White House’s nominee to serve as the Fed’s No. 2 official.

“The main story is the market view on the central bank’s next steps. The market is balancing two things: less support from monetary policy, but overall the underlying economy is good, and we think the earnings figures that will start to come out now will be quite strong,” said Luc Filip, head of investments at SYZ Private Banking.

Investors on Thursday examined data showing that filings for jobless claims rose to a seasonally adjusted 230,000 last week, higher than economists had expected. A tight U.S. labor market has kept applications near pre-pandemic lows for the past two months.

Other data showed that the prices suppliers charge businesses and other customers cooled in December. The Labor Department said its producer-price index rose 0.2% in December from the prior month, the slowest pace since November 2020.

“It fits into a larger narrative that inflation is likely peaking this quarter,” said Jack Ablin, founding partner and chief investment officer at Cresset Capital.

The yield on the benchmark 10-year U.S. Treasury note was little changed, at 1.723% Thursday from 1.724% Wednesday.

Earnings season kicks off this week, with major financial firms including BlackRock, Citigroup, JPMorgan and Wells Fargo set to report Friday. Investors are on edge after Jefferies Financial Group posted revenue and earnings that missed analysts’ estimates Wednesday, said Jeffrey Meyers, a consultant at Market Securities.

In individual stocks, shares of Delta Air Lines rose 4%, despite the company posting a quarterly loss, after the airline’s chief executive said he expected it to quickly recover from the effects of the Omicron variant. Home builder KB Home climbed 14% after its earnings came in above analysts’ expectations.

Overseas, the pan-continental Stoxx Europe 600 hovered around the flatline.

In Asia, most major benchmarks fell. The Shanghai Composite Index lost 1.2% on concerns about China’s latest Covid-19 outbreak after the port city of Tianjin reported higher infections. Japan’s Nikkei 225 retreated 1%. 

Genting Hong Kong, a cruise-ship operator, plunged 56%. The stock resumed trading Thursday after a German subsidiary filed for insolvency, triggering defaults. Australia’s Crown Resorts jumped nearly 9% after private-equity giant Blackstone raised its takeover offer for the company. 

Write to Anna Hirtenstein at [email protected] and Karen Langley at [email protected]