By Stephen Culp
NEW YORK, Oct 9 (Reuters) - Wall Street inched lower on Thursday as investors, left with no economic data or any sentiment-swaying catalysts, took the opportunity to consolidate ahead of third-quarter earnings season.
The S&P 500 and the Nasdaq eased back from Wednesday's record closing highs, but the blue-chip Dow was down the most.
"On days like this, tough to ascribe like a specific reason why the market is selling off when it's not much of a decline," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "I think that investors are starting to set up positions for earnings next week, and I think we're seeing a little bit of profit taking in some of the areas that have had pretty significant gains."
The stock market's pause comes amid a steep rally that has been largely driven by the rise of artificial intelligence technology. The runup has prompted concerns that a bubble is forming, which could be a harbinger of an impending correction.
Sunday will mark the current bull market's third anniversary; the benchmark S&P 500 touched the nadir of its current market cycle on October 12, 2022 on the heels of monetary tightening from the Fed. Over that time period, while tech and tech-adjacent megastocks have driven the index nearly 90% higher, history shows the current bull market has more gas in its tank.
The U.S. government shutdown entered its ninth day, with few signs of progress amid a congressional stalemate. Consequently, market participants continue to be deprived of essential economic data. And with the start of third-quarter earnings season just days away, the scarcity of market-moving catalysts is focusing investors' attention on remarks from monetary policymakers for clues regarding the central bank's rate cut intentions through the end of the year.
New York Federal Reserve President John Williams said he favors more interest rate reductions before year-end due to risks facing the weakening labor market, in an interview with the New York Times published on Thursday.
"It’s going to be interesting to see what the Fed does in the absence of data," Carlson added. "Are they going to move or are they going to say, 'Well, we're data-dependent, we didn't get any data, so we're going to hold off and see what happens'"?
Even so, financial markets are currently pricing in a 94.6% likelihood that the Fed will implement a 25 basis-point interest rate cut at the conclusion of its October 28-29 meeting, according to CME's FedWatch tool.
The Dow Jones Industrial Average .DJI fell 314.27 points, or 0.67%, to 46,288.19, the S&P 500 .SPX lost 35.51 points, or 0.53%, to 6,718.21 and the Nasdaq Composite .IXIC lost 114.79 points, or 0.50%, to 22,928.81.
Among the 11 major sectors of the S&P 500, materials .SPLRCM were down the most, while consumer staples .SPRLCS were the clear frontrunners.
Housing .HGX and homebuilding .SPCOMHOME were among the clear underperformers, both off more than 2%.
On Tuesday of next week, JPMorgan Chase JPM.N, Goldman Sachs GS.N, Citigroup C.N and Wells Fargo WFC.N are slated to report quarterly results, marking the unofficial launch of third-quarter earnings season.
Analysts currently predict year-on-year S&P 500 earnings growth of 8.8% in the July-September period, weaker than the second quarter's 13.8% and the year-ago quarter's 9.1% annual growth, according to the most recent data from LSEG.
Delta Air Lines DAL.N provided an upbeat forecast for the current quarter, after posting stronger-than-expected third-quarter earnings. The airline's shares jumped 4.9%.
Other U.S. carriers also gained, boosting the S&P 1500 Airlines index by 2.0%.
U.S. retailer Costco Wholesale COST.O rose 2.2%, after reporting September sales data.
Shares of Albemarle ALB.N increased 4.9% after brokerage TD Cowen raised its price target on the lithium producer and as China tightened export controls on rare earths.
Declining issues outnumbered advancers by a 3.51-to-1 ratio on the NYSE. There were 300 new highs and 78 new lows on the NYSE.
On the Nasdaq, 1,514 stocks rose and 3,111 fell as declining issues outnumbered advancers by a 2.05-to-1 ratio.
The S&P 500 posted 19 new 52-week highs and 10 new lows while the Nasdaq Composite recorded 117 new highs and 55 new lows.