Stocks close lower, major averages on pace for weekly declines as recession fears mount

Pro Picks: Watch all of Thursday's big stock calls on CNBC
Pro Picks: Watch all of Thursday's big stock calls on CNBC

Stocks on Thursday posted their third straight daily decline, as mounting fears that the Federal Reserve's aggressive rate hikes will push the economy into a recession dented risk appetite for investors.

The S&P 500 slid 0.8% to 3,757.99, while the Nasdaq Composite shed 1.4% to 11,066.81. The Dow Jones Industrial Average closed 107.10 points lower, or 0.3%, at 30,076.68.

Thursday's session left the major averages on pace to close the week with losses. The Dow is down about 2.42% week to date, while the S&P and Nasdaq have tumbled 3% and 3.3%, respectively. The S&P and Dow closed Thursday 2.5% and 0.5% off their recent lows.

Bond yields surged again on Thursday, with the yields on the 10-year and 2-year Treasury notes notching fresh multiyear highs, hitting their highest levels since February 2011 and October 2007, respectively.

Thursday's moves came after the Fed on Wednesday maintained its aggressive stance, enacting another 75 basis point hike and predicting bringing short-term rates as high as 4.4% by the end of 2022. Other central banks worldwide followed the Fed's lead, implementing their own sizeable hikes overnight despite potential repercussions for the economy.

Growth-oriented tech stocks and semiconductors took a leg lower on Thursday amid fears of slowing economic growth. Industrials and consumer discretionary were the worst-performing S&P 500 sectors, losing about 1.7% and 2.2%, respectively, because of their reliance on the economy.

"The Fed's paved the way for much of the world to continue with aggressive rate hikes, and that's going to lead to a global recession, and how severe it is will be determined on how long it takes inflation to come down," said Ed Moya, a senior market analyst at Oanda.

Defensive stocks outperformed with drugmakers and consumer staples in the green on Thursday. Eli Lilly shares gained 4.9% after UBS upgraded the stock and said it could be developing the biggest drug ever.

Consumer discretionary is Thursday's worst-performing S&P 500 sector

Consumer discretionary was the worst-performing sector in the S&P 500 on Thursday, falling nearly 2.2% as concerns of slowing economic growth mounted on Wall Street.

Caesars Entertainment slumped 9.4% and was the worst-performing stock in the sector. Travel names including Expedia Group and MGM Resorts shed 7.1% and 6.6%, respectively, while Wynn Resorts and Marriott International dropped more than 5% each.

Airline stocks also took a hit, with shares of United, American Airlines and Delta down roughly 4% each.

— Samantha Subin

Consumer discretionary is Thursday's worst-performing S&P 500 sector

Consumer discretionary was the worst-performing sector in the S&P 500 on Thursday, falling nearly 2.2% as concerns of slowing economic growth mounted on Wall Street.

Caesars Entertainment slumped 9.4% and was the worst-performing stock in the sector. Travel names including Expedia Group and MGM Resorts shed 7.1% and 6.6%, respectively, while Wynn Resorts and Marriott International dropped more than 5% each.

Airline stocks also took a hit, with shares of United, American Airlines and Delta down roughly 4% each.

— Samantha Subin

Where the major averages stand

All the major averages are on track to finish the week with losses, with the Dow Jones Industrial Average down 2.42% and the S&P 500 and Nasdaq Composite down 2.98% and 3.33%, respectievely.

At the conclusion of Thursday session the S&P and Dow sit about 2.5% and 0.5% off their recent lows, respectively. The Nasdaq is roughly 4% above its recent bottom.

All the major averages are also headed for weekly losses, led to the downside by consumer discretionary and financials, which are down at least 4% this week. Utilities and energy are the only positive sectors since the beginning of the year.

— Samantha Subin

Natural gas tumbled Thursday to lowest since July, wheat reached highest since July

October natural gas contracts closed 8.9% lower Thursday at $7.089, the lowest since July 15. Natgas is now on pace for a fifth weekly decline for the first time since January 2019.

Despite rising Thursday, West Texas Intermediate crude oil is still on pace to register a fourth straight weekly decline for the first time since early December 2021.

Among agricultural commodities, December wheat hit $9.225 a bushel, the highest since July 11, and is on pace for its fourth weekly gain in five weeks.

— Scott Schnipper, Gina Francolla

Stocks close lower, major averages on track for weekly losses

All the major averages finished Thursday's post-Fed trading session lower, with all the major averages on track to finish the week with losses.

The S&P 500 dropped 0.84% to 3,757.99, while the Nasdaq Composite tumbled 1.37% to 11,066.81. The Dow Jones Industrial Average closed 107.10 points lower, or 0.35%, at 30,076.68.

— Samantha Subin

Cano Health shares surge more than 40% amid reported buyout talks

Shares of Cano Health surged more than 40% in late afternoon trading following a Wall Street Journal report that Humana and other potential buyers are in talks to buy the primary-care provider.

The report, which cited sources familiar with the discussions, indicated that a deal could be reached in the weeks ahead.

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— Samantha Subin

FedEx announces cost cuts, hike prices

Shares of FedEx rose 2.8% in afternoon trading, erasing earlier losses after the company announced its fiscal first-quarter results and detailed cost-cutting initiatives. The company, which had warned investors to expect a weak quarter earlier this month, said it planned to cut expenses by more than $2 billion during the current fiscal year.

FedEx also said it would repurchase $1.5 billion of its stock during the fiscal year and raise prices for customers on Jan. 2, 2023.

— Jesse Pound

S&P 500 is in a 'bottoming process,' Stifel's Bannister says

Stifel's Barry Bannister believes that current market conditions signal that the S&P 500 is in a "bottoming process."

"It is only if the Fed becomes incrementally more hawkish Nov/Dec-2022 that we see 10Y TIPS yield rising further, thus we believe the P/E is bottoming," Bannister said in a note to clients, adding that he expects yields to pull back and the S&P 500 to hit 4,400 by the fourth quarter of 2022 or the first quarter of 2023.

On the recession front, Stifel isn't projecting one until the beginning of the third quarter of next year, noting that employment has yet to weaken as it typically does for a downturn.

Bannister also expects more information on the war in Ukraine, inflation and a myriad of other issues come November, which should provide further clarity for markets.

— Samantha Subin

Shares of Caesars down 10%

Growing fears of a recession are hitting travel stocks hard, and that has led to a rough stretch for Caesars Entertainment.

The casino stock dropped 10% on Thursday, bringing its losses since Monday's close to nearly 20%.

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Other gaming stocks haven't performed much better. Wynn, MGM and Penn National are among the names with outsized losses this week.

— Jesse Pound

Drugmakers headline midday movers

Pharmaceutical stocks were some top performers in early afternoon trading on Thursday.

Novavax — Shares of the drug maker tumbled 13.9% after JPMorgan downgraded Novavax to underweight from neutral. The bank also slashed its price target on the stock, citing dwindling demand for Covid-19 vaccines.

Eli Lilly — The pharmaceutical stock climbed 4.2% after UBS upgraded Eli Lilly to buy from neutral. UBS said that Eli Lily's new weight loss product could be "the biggest drug ever."

Check out more movers here.

— Jesse Pound

Markets shouldn't rule out the possibility of a deep recession, Truist's Lerner says

Many economists anticipate a mild recession ahead as the Federal Reserve hikes rates to fight inflation, but don't rule out a deeper downturn, Truist's Keith Lerner says.

"That makes some sense but don't discount that it could be longer because of the uncertainty around Fed policy," he said.

Lerner pegs the odds of a recession at 50% over the next six to 12 months but says the longer rates stay elevated and competitive, the higher the probability of a recession. Tighter Fed policy for longer could also impact how long it lasts.

Lerner says investors should also keep in mind that markets won't reach a bottom until the economy is in a recession.

— Samantha Subin

Bond yields surge as recession fears mount

Bond yields surged again on Thursday in response to another aggressive rate hike from the Federal Reserve.

The yield on the 10-year and 2-year Treasury notes topped multiyear highs in response to the Fed's move and central banks around the world deliver large hikes.

The yield on the 10-year note last traded about 18 basis points higher to 3.69%. The yield on the 2-year note surged 14 basis points to 4.137%, after hitting an earlier high of 4.163%.

— Samantha Subin

Evercore ISI cuts S&P 500 year-end target

The Federal Reserve's signal that it may risk a recession in its inflation fight prompted Evercore ISI to slash its market forecast Thursday.

The Wall Street firm cut its year-end S&P 500 target to 3,975 from 4,200. The new target is still about 5% higher than Wednesday's close of 3,789.93 but would represent a 16% decline for 2022.

"Stocks' reaction to the FOMC reflects that a rising probability of recession requires further discounting," Evercore's Julian Emanuel said in a note to clients. "Chair Powell, to the market's obvious dismay, outdid Jackson Hole's abject, 'drop the mic' hawkishness on Wednesday. Hard to believe, but he did."

— Yun Li

Cathie Wood says she's most disappointed about the Fed's unanimity

Ark Invest's Cathie Wood said the most disappointing element about the Federal Reserve's policy decision was its unanimity.

"None of those voting on the Federal Reserve is focused on the significant price deflation in the pipeline," Wood said in a tweet. "The Fed seems to be making decisions based on lagging indicators and analogies."

The innovation investor has been warning of the risk of deflation instead of inflation, as she believes higher prices were caused by temporary Covid-related disruptions. Wood has previously said the Fed is making a policy mistake with aggressive rate hikes, and that deflationary forces will force the central bank to make a policy pivot.

— Yun Li

Technology, semiconductor stocks fall

A slew of technology and semiconductor stocks slipped on Thursday as investors moved out of growth-focused areas following the Federal Reserve's aggressive rate decision.

Shares of Nvidia slumped about 4%, while Qualcomm, Broadcom, and Micron Technology fell about 1% each. On the big tech front, Amazon, Apple and Netflix shed about 1% each. Tesla shares fell roughly 2%.

The move in tech stocks pushed the tech-heavy Nasdaq Composite down more than 1% in early morning trading.

— Samantha Subin

Consumer discretionary, industrials among Thursday's worst-performing stocks

Consumer discretionary and industrials were among the S&P 500's worst-performing sectors on Thursday, falling more than 1.1% each.

A slew of airline and travel stocks, including United, American Airlines and Boeing took a leg lower, falling 3% each. Marriott International, MGM Resorts and Booking Holdings also slumped at least 2%.

Shares of Caesars and Etsy shed about 5% each.

— Samantha Subin

Energy stocks rise as oil gains

Energy stocks rose on Thursday as oil prices surged again, with shares of last up Schlumberger, Valero Energy and Baker Hughes last up more than 2% each.

It was also the best-performing sector in the S&P 500 and the only area trading solidly in positive territory, rising nearly 2%.

Brent crude futures rose $2.73 or more than 3%, to $92.53 per barrel. U.S. West Texas Intermediate crude last traded 3.4% or $2.82 higher to $85.76.

— Samantha Subin

Stocks open slightly lower, S&P 500 flat

Stocks were mostly lower in early morning trading, with the Dow Jones Industrial Average last down 30 points, or 0.1%. The S&P 500 traded 0.1% lower and opened flat, while the Nasdaq Composite dipped 0.2%.

— Samantha Subin

Other central banks join the Fed in raising interest rates

The Federal Reserve is not alone.

In the same week the U.S. central bank raised its benchmark interest rate by 0.75 percentage point, or 75 basis points, several of its global counterparts followed suit. That continues a trend in which policymakers around the world are fighting to control inflation that has spiraled over the last year.

To name a few, the Bank of England on Thursday announced a 0.5 percentage point increase ,or 50 basis points, while the Swiss National Bank hiked by 75 basis point. The central banks of the Philippines and Indonesia both rang in with 50 basis point moves of their own, the latter moving twice what analysts had expected.

Norway's Norges Bank on Thursday raised half a percentage point, and the Hong Kong Monetary Authority matched the Fed with a 75 basis point move. Taiwan hiked by 12.5 basis points, or 0.125 percentage points.

Turkey was an exception, approving a rate cut of a full percentage point despite grappling with an 80% inflation rate. The Bank of Japan did not move its rates.

The rate moves are in response to inflation that has run rampant around the globe. Contributing factors include weakness in supply chains, the impact that the Russian invasion of Ukraine has had on energy prices, and trillions in stimulus provided by fiscal and monetary authorities.

Fed Chairman Jerome Powell on Wednesday underlined his commitment to bringing down price surges, saying the U.S. central bank has "both the tools we need and the resolve" to accomplish the task.

—Jeff Cox

Jobless claims rise slightly

Initial jobless claims rose to 213,000 for the week ended Sep. 17, showing signs of a strong labor market despite the Federal Reserve's attempts to slow economic growth.

Economists surveyed by Dow Jones had anticipated jobless claims would rise to 215,000 for the period.

Claims for the week ended Sep.10 were revised down to 208,000.

"Bottom line, it is seemingly clear that employers are holding on tight to their employees in many parts of the economy," wrote Bleakley Advisory Group's Peter Boockvar in a note to clients Thursday.

— Samantha Subin

Stocks could struggle after Fed's guidance raises concerns about recession

Strategists say the stock market could continue to struggle against higher interest rates, and the prospect of recession creates even more potential hazards for corporate profits.

When it raised rates Wednesday, the Federal Reserve also laid out a plan to get its benchmark fed funds rate to 4.6% by early next year and keep policy tight for three years.

That triggered concerns across the bond market that the Fed is now more willing to accept economic pain and even risk recession in order to crush inflation. The Fed funds rate is currently in a range of 3% to 3.25%, after the Fed's three-quarter point hike Wednesday.

--Patti Domm

Where the major averages stand: Dow, S&P 500 at lowest point since June

Wednesday's sell-off put the major averages back at levels not seen in weeks.

The S&P 500 slumped 1.71% to close at levels last seen on June 30 on a closing basis, while the Nasdaq Composite ticked 1.79% lower to its lowest point since July 1. Both averages are down 2% for the week and sit roughly 21.3% and 30.8% off their 52-week highs, respectively.

The Dow Jones Industrial Average finished the session 522 points lower, putting it on pace for a more than 2% loss for the week. The 30-stock index sits more than 18% off its record high and is at its lowest since June 17.

— Samantha Subin

Robinhood surges after report that payment for order flow will remain intact

Stocks tied to new retail trading platforms jumped in the premarket after Bloomberg News reported that the Securities and Exchange Commission will not ban payment for order flow.

Retail brokerage Robinhood saw its stock rise more than 6% in premarket trading. Shares of market maker Virtu Financial jumped nearly 9%.

Payment for order flow is a controversial practice in which retail brokerage firms get a portion of the spread earned by market makers on trades, in turn helping them offer no-fee trading to customers. Some lawmakers and regulators have pushed to ban the practice, arguing that it could be harmful to small dollar traders.

The Bloomberg report did say that the SEC may make some rules for payment for order flow that hurt the profitability of the practice.

— Jesse Pound

Revance Therapeutics gains nearly 3% on Goldman Sachs initiation

Shares of Revance Therapeutics, a biotechnology company with a Botox competitor, rose nearly 3% in premarket trading Thursday after Goldman Sachs initiated coverage of the company with a buy rating and price target implying nearly 30% upside.

"We believe the imminent launch of Daxxify into the $1.7bn US cosmetic neuromodulator market has the potential to be disruptive, garnering share and potentially also helping to grow what remains a still relatively underpenetrated market," wrote analyst Chris Shibutani in a Thursday note.

Read more on CNBC Pro.

—Carmen Reinicke

Bank of England hikes benchmark rate by 50 basis points

The Bank of England on Thursday raised its benchmark rate by 50 basis points to 2.25% in an attempt to ease elevated inflation that stood at 9.9% year over year in August.

It marks the central bank's seventh consecutive increase since the rate-hiking cycle began and brings the country's interest rates to a level not seen since 2008.

The move comes less than a day after the Federal Reserve hiked interest rates by 75 basis points.

Earlier this month, the European Central Bank hiked rates by 75 basis points. Switzerland's central bank hiked similarly early Thursday.

— Samantha Subin

Futures back to flat

After a brief gain overnight, stock futures have fallen back to flat for the session as investors continue to digest the Fed's actions on Wednesday.

Chris Senyek of Wolfe Research believes the Fed's message is very simple.

"The Fed is going to tighten until inflation comes down significantly — even if it causes a recession!" Senyek wrote to clients Thursday. "Our bearish base case remains intact! While the market is finally coming to grips with the amount of Fed tightening that is likely to occur, we do not believe that a demand-driven recession is anywhere close to being fully priced in."

-John Melloy

Eli Lilly rises on UBS upgrade

Shares of Eli Lilly rose 1.4% in premarket trading Thursday after UBS upgraded the stock to buy, citing its weight loss drug which could be "the biggest drug ever."

The rating change comes after mounjaro, or tirzepatide, a key weight loss drug, showed promise in a random study called Surmount-1 and was approved for use in patients with type 2 diabetes. UBS now sees Eli Lilly surging 22% on sales of the drug, which could top $25 billion.

Read more on CNBC Pro.

—Carmen Reinicke

CNBC Pro: This fund manager is beating the market. Here’s what he’s betting against

Outperforming fund manager names his short positions
Outperforming fund manager names his short positions

Stock markets are down but the fund managed by Patrick Armstrong at Plurimi Wealth is continuing to deliver positive returns. The fund manager has a number of short positions to play the market volatility.

Pro subscribers can read more here.

— Zavier Ong

U.S. 2-year Treasury yield inches toward 2007 highs

The 2-year Treasury yield inched as high as 4.132% in Asia's morning trade after the Fed hiked rates by 75 basis points, close to the October 2007 high of 4.138%.

The benchmark 10-year Treasury yield stood at 3.5514% after hitting 3.64% overnight in the U.S.

— Abigail Ng