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Wall Street slipped on Thursday as hawkish views from a top Federal Reserve official and data indicating a tight labor market dampened hopes of a less aggressive monetary policy approach from the central bank.
St. Louis Federal Reserve President James Bullard said rate increases “have had only limited effects on observed inflation,” and the Fed needs to continue raising it by at least another full percentage point.
The comments from a voting member of the policy-setting panel follows strong retail sales numbers on Wednesday, which brought on worries of more rate hikes, even though softer inflation data earlier had perked up hopes of smaller increases.
Trader expectations of a 50-basis-point rate hike fell to 80.6% from 85.4% a day earlier, according to the CME Fedwatch tool. FEDWATCH
Several other Fed officials in recent days have also stressed the need to further raise rates although at a slower pace.
“The Fed is trying to make sure the market doesn’t get too ahead of itself,” said Tim Holland, chief investment officer at Orion Advisor Solutions.
“They’re trying to walk this rhetorical tightrope where in between meetings and big data points, they’re reminding the market that they’re still tightening.”
A report from the Labor Department showed the number of Americans filing new claims for unemployment benefits fell last week, indicating a strong labor market.
Among the 11 S&P 500 sectors, retail (.SPXRT) and consumer discretionary (.SPLRCD) were down around 1.3% each.
Shares of megacap tech and other growth companies such as Tesla (TSLA.O) Amazon.com (AMZN.O) and Alphabet (GOOGL.O) were down between 0.3% and 1.4%.
The S&P 500 (.SPX) has risen around 7% from its October closing lows on hopes of a less hawkish Fed, though the index has logged steep losses so far this year on recession worries stemming from the hefty rate hikes.
At 12:18 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 5.65 points, or 0.02%, at 33,548.18, the S&P 500 (.SPX) was down 21.05 points, or 0.53%, at 3,937.74, and the Nasdaq Composite (.IXIC) was down 49.54 points, or 0.44%, at 11,134.12.
Department store chain Macy’s Inc (M.N) gained 12.3% and personal care products retailer Bath & Body Works Inc (BBWI.N) surged 21.8% after the companies raised their annual profit forecasts.
Roku Inc’s (ROKU.O) shares fell 1.1% as the streaming platform said it plans to cut 200 jobs.
Declining issues outnumbered advancers for a 3.52-to-1 ratio on the NYSE and for a 2.22-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and one new low, while the Nasdaq recorded 22 new highs and 132 new lows.