U.S. stocks backtracked on the gains they made early on Thursday following the release of U.S. manufacturing data. U.S. manufacturing activity in November shrank for the first time in over two and a half years. Despite the easing of inflation and solid consumer spending, higher borrowing costs have had a negative effect on the demand for goods.
“Obviously the (manufacturing) sector is in recession and this basically upholds the fact that we’re headed for a recession,” Peter Cardillo, chief market economist at Spartan Capital Securities commented.
Federal Reserve chair Jerome Powell stated on Wednesday that the time has come to slow down the long-sustained interest rate hikes while cooling down high borrowing costs in the process. Following this announcement, the S&P 500 index rose above its 200-day moving average for the first time since April.
Markets were also boosted early in the day by data from the Commerce Department showing that consumer spending has risen by 0.8%. Consumer spending accounts for two-thirds of U.S. economic activity.
Employment figures also seem to be on an upward trend, with a report from the Labor Department on Thursday revealing a 16,000 drop in claims for state unemployment benefits for the week.