By Chris Matthews and William Watts, MarketWatch

Productivity growth soars to highest annual rate since 2010

Stocks traded lower midday Thursday, building on losses the previous session that were in apparent response to Federal Reserve Chairman Jerome Powell's failure to affirm market expectations the next move in rates would be a cut.

The flow of corporate earnings continued as investors also looked ahead to economic data, including April jobs figures due on Friday.

What are major indexes doing?

The Dow Jones Industrial Average tumbled 142 points, or 0.5%, to 26,295, while the S&P 500 lost 9 points, or 0.3%, to 2,911. The Nasdaq Composite Index retreated 14 points, or 0.2%, to 8,021.

What's driving the market?

Stocks are following on their worst day in more than a month (http://www.marketwatch.com/story/stock-futures-point-to-more-records-as-apple-results-cheer-investors-2019-05-01) with another session of losses. Equities turned lower Wednesday afternoon, after Powell, in a news conference, described below-target inflation readings as "transitory" (http://www.marketwatch.com/story/fed-sticks-with-patient-policy-notes-weaker-core-inflation-2019-05-01) and gave no indication the central bank is in a hurry to cut interest rates.

Powell's position appeared to disappoint investors. Fed funds futures had reflected -- just before Powell's news conference -- a more than 60% chance that the Fed cuts rates before year-end, as of midday Thursday, that probability had fallen to 49.6%, according to CME Group (https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).

Read:Economist Mohamed El-Erian: When central banks don't understand the markets, watch out (http://www.marketwatch.com/story/when-central-banks-dont-understand-the-markets-watch-out-warns-economist-mohamed-el-erian-2019-05-02)

U.S.-China trade talks are again getting the attention of market participants, after Politico (https://www.politico.com/story/2019/05/01/us-china-deal-tariffs-1400007) and CNBC reported that the two sides are nearing a deal, with an announcement possible as soon as next Friday (https://www.cnbc.com/2019/05/01/trump-news-us-china-trade-deal-possible-by-next-friday.html). The Wall Street Journal, however, reported Wednesday evening (https://www.wsj.com/articles/u-s-china-conclude-productive-trade-talks-but-sticking-points-remain-11556718515) that sticking points remain, including U.S. objections to Chinese subsidies to domestic businesses.

Read:Powell's press conference draws rave reviews for simplicity of Fed's message (http://www.marketwatch.com/story/powells-press-conference-draws-rave-reviews-for-simplicity-of-the-feds-message-2019-05-01)

What stocks are in focus?

First-quarter corporate results continue to flood in.

Shares of chip maker Qualcomm Inc. (QCOM) rose 2%, reversing premarket losses, after the company topped estimates (http://www.marketwatch.com/story/qualcomm-stock-slides-after-earnings-apple-settlement-to-add-nearly-5-billion-2019-05-01) for the quarter in a Wednesday evening earnings release.

Opinion:Apple deal doesn't solve Qualcomm's problems (http://www.marketwatch.com/story/apple-deal-doesnt-solve-qualcomms-problems-2019-05-01)

(http://www.marketwatch.com/story/apple-deal-doesnt-solve-qualcomms-problems-2019-05-01)Shares of Dow component Dow Inc. (DOW) were off 3.6% after reporting first-quarter net sales that fell 10% from a year ago but remained above the consensus forecast (http://www.marketwatch.com/story/dow-revenue-falls-less-than-expected-sees-discrete-headwinds-in-second-quarter-2019-05-02).

Shares of Under Armour Inc. (UAA) rallied 4.1% Thursday, after the athletic brand reported earnings and revenue that beat expectations and raised full-year guidance.

Shares of DowDuPont Inc. (DWDP) fell 5.9% early Thursday, after the chemical giant reported falling profits and sales numbers (http://www.marketwatch.com/story/dowdupont-profit-matches-views-sales-fall-short-2019-05-02) that fell short of Wall Street expectations.

Caterpillar Inc. (CAT) said Thursday that it would raise its quarterly cash dividend (http://www.marketwatch.com/story/caterpillar-to-raise-quarterly-dividend-by-20-as-part-of-plan-to-return-cash-to-investors-2019-05-02) by 20% to $1.03 per shares. The Dow component's stock fell 2.3%.

Shares of Square Inc. (SQ) were down 8.8%, after the company reported Wednesday evening (http://www.marketwatch.com/story/square-stock-falls-after-outlook-volume-come-up-short-2019-05-01) that payment volume in the first quarter fell short of analysts estimates, even as the company surpassed earnings and revenue forecasts.

Wayfair Inc. (W) stock tumbled 10.8% Thursday, after the online home furnishings retailer reported a wider-than-expected first-quarter loss (http://www.marketwatch.com/story/wafairs-stock-falls-after-losses-widen-more-than-expected-2019-05-02), while revenue came in just above forecasts.

Shares of Dunkin' Brands Inc. (DNKN) rallied 1.4% Thursday, after the chain restaurant company reported same-store sales growth (http://www.marketwatch.com/story/dunkin-brands-shares-up-25-premarket-as-earnings-top-estimates-2019-05-02) that easily beat Wall Street forecasts.

Shares of Avon Products, Inc. (AVP) retreated 8.9%, after the beauty-products firm reported widening losses (http://www.marketwatch.com/story/avon-adjusted-profit-beats-estimates-as-revenue-falls-short-2019-05-02) in the first-quarter and revenue that fell short of analysts forecasts.

Kellog Co. (K) stock tumbled 3.9% Thursday, after the company reported first-quarter profits beat estimates (http://www.marketwatch.com/story/kelloggs-stock-slumps-after-earnings-beat-but-sales-comes-up-shy-cfo-to-leave-2019-05-02), but that sales fell shy. Meanwhile, the company announced that CFO Fareed Khan was leaving the company on July 1.

Abiomed Inc. (ABMD) shares fell 0.8%, after releasing its fourth-quarter earnings results (http://investors.abiomed.com/static-files/50215175-aac7-42fc-9ee3-cd38e5e2664c) Thursday morning.

What are analysts saying?

After Powell's press conference, investors were "left with a market lacking a material, positive catalyst at the moment and one at the top of reasonable valuations," wrote Tom Essaye, president of the Sevens Report, in a note to clients.

"That makes the near-term risk/reward at best neutral, and with a U.S./China trade deal apparently meeting already priced in expectations, this market could at best churn sideways, or even see a mild pullback," he added.

"Central bankers always describe inflation, whether it be rising or falling as 'transitory,' and it was never a realistic probability that the Fed would open the door to the prospect of rate cuts when wage growth is above 3% and yesterday's ADP payrolls report for April added another 275,000 new jobs," said Michael Hewson, chief market analyst at CMC Markets UK, in a note. "This suggests that whatever one thinks of the U.S. labor market it is nowhere near as tight as some might suggest."

What's on the economic calendar?

New applications for jobless benefits remained at a three-month high (http://www.marketwatch.com/story/jobless-claims-stick-to-3-month-high-of-230000-after-easter-holiday-spring-break-2019-05-02) during the week ended April 27, with 230,000 jobless claims filed, above the 215,000 expected by economists polled by MarketWatch, and in line with previous week.

Productivity growth soared in the first quarter of 2019 (http://www.marketwatch.com/story/productivity-soars-36-in-first-quarter-drives-fastest-yearly-gain-since-2010-2019-05-02), rising to an annual rate of 3.6%, the fastest gain since the fall of 2014 and above the 2.9% increase predicted by economists polled by MarketWatch. Productivity has increased 2.4% in the past 12 months, the fastest clip since 2010.

Unit-labor costs, meanwhile, fell 0.9%, reinforcing recent evidence that rising wage gains are not driving overall inflation higher.

Productivity growth indicates that companies are producing more goods and services per worker hour, which can enable companies to offer higher pay without accepting lower profits.

Factory orders for the month of March rose 1.9% (http://www.marketwatch.com/story/factory-orders-jump-in-march-after-two-declines-2019-05-02), above the 1.7% growth predicted by economists polled by MarketWatch.

How are other markets trading?

Stocks in Asia closed mostly higher Thursday (http://www.marketwatch.com/story/asian-markets-mixed-after-fed-leaves-rates-steady-2019-05-01). While Japan's Nikkei remained closed for a for a 10-day holiday to commemorate the succession of new Emperor Naruhito, Hong Kong's Hang Seng Index and China's Shanghai Composite Index both advanced on the day.

European stocks were mostly lower (http://www.marketwatch.com/story/strong-banks-and-weak-miners-tug-europe-markets-in-opposite-directions-2019-05-02) as reflected by a 0.5% decline in the Stoxx Europe 600.

Crude oil prices were falling Thursday (http://www.marketwatch.com/story/oil-prices-fall-as-robust-us-production-counters-opecs-constraint-iran-sanctions-to-kick-in-2019-05-02), down 2.4%, while gold prices were also under pressure (http://www.marketwatch.com/story/gold-remains-lower-after-fed-pours-cold-water-on-rate-cut-hopes-2019-05-02), retreating 1.1%. The U.S. dollar index , meanwhile, edged slightly higher (http://www.marketwatch.com/story/dollar-consolidates-as-investors-eye-fridays-employment-report-2019-05-02).

 

(END) Dow Jones Newswires

May 02, 2019 11:38 ET (15:38 GMT)

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