Dow flips between gains and losses after hearing from Fed’s Powell

What’s driving markets

The Fed chair said the central bank may need to push borrowing costs even higher amid stubbornly persistent inflation, despite a slowdown from last year’s four-decade highs. Over the last 18 months, the Fed has raised interest rates at the fastest pace since the 1980s.

“In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” Powell said.

But Powell also said policy makers were “proceeding carefully” given “uncertainties and risks, and how far we have come.”

“Statements on ‘proceeding carefully’ were taken as a sign that the FOMC (Federal Open Market Committee) is likely to pause at the November meeting. This would mark the first consecutive pause in interest rates since this rate hiking cycle commenced,” said Michelle Cluver, portfolio strategist at X, in emailed comments.

During a question-and-answer session that followed his prepared remarks, Powell acknowledged that rising Treasury yields were leading to tighter financial conditions, which could help aid the Fed in its inflation-fighting efforts.

See: Fed’s Powell: Live coverage of pivotal speech as bond yields surge

“The fact is, the yields are doing some of the work for them and I think what he’s acknowledging is that he’s keeping his eye on that, but his message really is ‘if the market doesn’t do it for us, we’ll do it ourselves,’” said JJ Kinahan, chief executive of IG North America, during a phone interview with MarketWatch.

See also: Powell says more strong data like September reports could warrant further interest-rate hikes

Investors remained focused on bond yields as the 10-year Treasury yield rose,
BX:TMUBMUSD10Y
moving just shy of 5% as it climbed to its highest level since the summer of 2007 earlier on Thursday. However, as Powell spoke, yields pared their initial advance, and were recently up less than one basis point on the day at 4.905%.

Read: Why stock-market investors are fixated on 5% as 10-year Treasury yield nears key threshold

U.S. labor-market data released Thursday came in stronger than expected, as the number of Americans who applied for unemployment benefits last week fell to a nine-month low of 198,000, defying expectations that layoffs would rise as higher U.S. interest impact the economy.

Meanwhile, a gauge of regional business activity published by the Philadelphia Fed remained in contractionary territory for the second straight month in October.

Housing-market data showed home sales in September fell to the lowest level since 2010, as high mortgage rates continue to deter buyers and sellers alike. Sales of previously owned homes fell by 2% to an annual rate of 3.96 million in September

Meanwhile, the third quarter corporate earnings reporting season moves on, with results from AT&T
T,
+7.61%
and Blackstone
BX,
-7.23%,
which surpassed expectation. Reports from Western Alliance Bancorp
WAL,
-0.04%,
CSX
CSX,
+0.79%
and Intuitive Surgical
ISRG,
-0.17%
were set to follow after the bell.

In terms of the wider market the results late Wednesday from Netflix
NFLX,
+16.37%
and Tesla
TSLA,
-9.62%
have pretty much canceled each other out, with shares in the streaming giant jumping 12.5% on well-received numbers but the electric vehicle maker losing 7% following cautious comments from Elon Musk.

Tesla was the only member of the Magnificent 7 to trade in the red Thursday, while shares of Amazon.com Inc.
AMZN,
+0.58%
and AI darling Nvidia Corp.
NVDA,
+0.50%
were notably higher.

Companies in focus

• Equifax Inc. shares
  EFX,
  +2.56%
  sank after the credit-score agency cut its outlook for the year, over concerns that high mortgage rates are causing mortgage credit inquiries to track at a 37% decline for the year.

• American Airlines Group Inc.
  AAL,
  +2.02%
  bounced sharply off a three-year low into positive territory Thursday, even after the air carrier reported third-quarter revenue that came up a bit short and provided a downbeat profit outlook.

• Las Vegas Sands 
  LVS,
  +3.97%
  saw its shares jump, bringing up other casino stocks, after it noted a recovery at its resorts in Macau and Singapore.

—Jamie Chisholm contributed.