Investors also continued to digest the Federal Reserve’s decision to raise interest rates and lay out a plan to unwind its $4.5 trillion balance sheet.
The U.S. central bank hiked rates for a second time this year, as was widely expected, but some investors doubted the Fed’s plans.
“From a general perspective, [the Fed announcement] was fairly in line with expectations,” said Eric Stein, co-director of global income at Eaton Vance. “That being said, after a weaker-than-expected CPI print, it may have seemed hawkish to some.”
On Wednesday, the Labor Department said the consumer price index — a key measure of inflation — fell 0.1 percent in May. The data dragged the benchmark 10-year note yield to its lowest levels in seven months. On Thursday, the yield hovered near 2.16 percent.
Stein added he thinks the Fed will start reducing its balance sheet in September, “which means the next rate hike may not come until December.”
There was a slew of economic data released Thursday, including weekly jobless claims, which came in at 237,000.
The Philadelphia Fed business index hit 27.6 in June, while the Empire State manufacturing survey reached 19.8.
“Most of the economic news has surprised to the downside but the Fed is still comfortable with raising rates,” said Bruce Bittles, chief investment strategist at Baird. “At the same time, it seems like we’ve lost some of that leadership from those six-to-seven high-flying stocks.”