Dow closes lower on Thursday and snaps 4-day win streak as November rally takes a break:

The Dow Jones Industrial Average closed lower on Thursday, although all three major indices notched weekly gains.

The 30-stock index slid 46 points, or 0.13%, to close at 34,945.57. The S&P 500 added 0.12% to finish the session at 4,508.24, while the Nasdaq Composite climbed 0.07% to 14,113.67.

— Lisa Kailai Han

Wednesday’s high-stakes Biden-Xi meeting left analysts with slight reassurance that both countries are keen on establishing a line of communication—but also maintained the belief that U.S.-China relations will remain competitive.

“We think the meeting shows the intention from both sides to restore bilateral relations. This could help reduce near-term risk of escalatory confrontation,” Morgan Stanley analyst Robin Xing wrote in a Thursday note. “But ‘competitive confrontation’ will likely remain for now, which does not mean a complete decoupling, but instead continued tech competition and de-risking away from China.”

This also indicates a continued reduction in direct foreign investment and technology spillover to China, Xing said, which could weigh on China’s long-term growth outlook. Moving forward, the analyst believes that further stimulus and reforms in China are needed to help stabilize market confidence in the country.

“As China risks tripping into a debt-deflation loop, we think more growth opportunities are needed to retain foreign investors, together with efforts to diversify the supply chain and strengthen its economic relations with other key trading partners,” Xing said.

According to Piper Sandler analyst Andy Laperriere, the economic and geopolitical relationships between the U.S. and China will remain locked in competition. Both countries are in a “cold war,” he said, expecting the U.S. to maintain its tariffs on Chinese imports and further tighten restrictions on what China can buy and how U.S. businesses can invest in China.

— Pia Singh

November’s red-hot stock rally means that some investors believe that the Federal Reserve could pull off a soft landing. But BTIG analyst Jonathan Krinsky isn’t as quick to jump to the conclusion.

“Bulls will cite the inflation data and resilience of cap-weighted indices as signs that a ‘soft-landing’ is here. Bears will cite slowing macro data, company-specific commentary, and persistent weakness of the average stock as signs that a ‘hard landing’ is on the horizon,” the analyst wrote. “We continue to find ourselves in the latter camp, and today’s data and price action are certainly not doing much to dissuade us from that view.”

Historical track records also show a similar pattern of rallies prior to a recession, Krinsky noted.

“If we look at all recessions ex-Covid over the last 50 years (’07, ’01, ’90, ’80-’82, and ’74), the common trait was there was a period where rates were falling and stocks were rallying. Ultimately as the reality of the recession set in, stocks began to fall,” he said.

The analyst added that the biggest tell for a recession will be any sign of “meaningful weakness” from mega-cap tech stocks, combined with lower rates.

— Lisa Kailai Han

The price of U.S. crude oil fell 5% on Thursday, as inventories rose while slowing industrial activity raised concerns about softening demadn.

The West Texas Intermediate December contract fell $3.76, or 4.9%, to settle at $72.90 a barrel, while the Brent January contract tumbled $3.81, or 4.69%, to $77.37 a barrel. U.S. crude and the global benchmark were both trading at their lowest level since early July.

U.S. crude inventory rose by 3.6 million barrels this week, while the Federal Reserve reported that industrial production and manufacturing declined in October.

— Spencer KImball

This week’s softer-than-expected inflation data has boosted the stock market’s ongoing November rally. But investors may be getting too far ahead of themselves, said Wolfe Research’s Chris Senyek.

“Over the past six weeks, stock investors have generally treated ‘bad news’ as ‘good news’ into a growing belief that the Fed will kick off a prolonged cutting cycle in the first half of next year as inflation continues to decline and the employment picture weakens — even though neither FOMC forecasts nor market consensus anticipate a recession hitting next year,” the analyst wrote in a note.

He added: “We continue to believe that consensus is underestimating the lagged impact of past rate hikes and the likelihood for Powell & Co. to be ‘higher for longer.'”

— Lisa Kailai Han

Energy stocks in the S&P 500 have lagged this week, bucking the broader market’s ascent.

The S&P 500 sector is on pace to end the week about 2% lower, making it the only of the 11 sectors on track for losses. Meanwhile, the index as a whole is poised to close the week 1.8% higher.

Diamondback Energy has led the sector lower with a drop of nearly 5%. ConocoPhillips, Halliburton and Baker Hughes are also among the worst performers this week, sliding more than 4% each.

Some energy stocks in the S&P 500 have been able to sidestep the downturn. Kinder Morgan is slated to finish the week 1.6% higher, while EQT and Oneok are both tracking for gains of around 1%.

— Alex Harring

Shoppers might get the gift of “deflation” this holiday season, according to Walmart CEO Doug McMillon.

The executive said on the company’s earnings call Thursday that deflation could be coming as general merchandise and key grocery items, such as eggs, chicken and seafood get cheaper. Walmart expects some of the higher prices, in pantry staples, for example, to begin to “deflate in the coming weeks and months.”

Referring to the potentially lower prices, McMillon said, “while that would put more unit pressure on us, we welcome it, because it’s better for our customers.”

Consumers are still facing a series of headwinds, including inflation, higher interest rates and ongoing global tensions, making the everyday shopper wary of their spending. Former Walmart U.S. CEO Bill Simon had warned of a consumer spending pullback in October.

— Pia Singh, Melissa Repko

Amazon announced Thursday that it will allow auto deals to sell cars through its site starting next year. Hyundai will be the first automaker to join.

Customers will be able to search for and purchase cars online, and then either pick up their vehicle or have it delivered by the local dealership.

The news appeared to push down shares of major car dealers. Shares of Carmax fell more than 6%, while Carvana dropped over 8%.

Check out the companies making headlines in midday trading.

• Sonos — The stock climbed 17% after Sonos CEO Patrick Spence said the company is entering a multiyear product cycle that will include an entry “into a new multi-billion dollar category” in the second half of fiscal 2024.
• Macy’s — Shares of the department store chain popped more than 6% on the back of better-than-expected quarterly results. Macy’s also said margins and inventory levels improved during the third quarter.
• General Motors — General Motors shares dipped more than 1% in midday trading. The move comes after union workers on Thursday said it ratified a record deal with the United Auto Workers.

Read the full list here.

— Sarah Min

Federal Reserve Governor Lisa Cook said Thursday she thinks the U.S. can avoid a deep recession but is attentive to risks that could thwart that goal.

“I believe that a soft landing is possible, with continued disinflation and a strong labor market, but it is not assured,” she said in prepared remarks for a speech in San Francisco.

Specifically, she noted the burden that higher interest rates are posing on small businesses, housing and lower-income households, noting that three groups “could be warning of broader stress ahead.”

—Jeff Cox

U.S. crude fell 5% on Thursday as inventories rose while industrial production fell.

The West Texas Intermediate December contract fell $3.84, or 5.01%, to $72.82 a barrel while the Brent January contract tumbled $3.91, or 4.82%, to $77.27 a barrel. U.S. crude and the global benchmark were both trading at their lowest level since early July.

U.S. crude inventories rose by 3.6 million barrels last week while production held steady at a record 13.2 million barrels per day, according to data released by the Energy Information Agency Wednesday.

And U.S. industrial production fell by 0.6% in October as the United Auto Workers strike impacted motor vehicle output, according to data released by the Federal Reserve on Thursday.

— Spencer Kimball

Wolfe Research thinks that the outlook is promising for small-cap stocks.

“Over the past few months, the levels of small cap underperformance has been staggering,” wrote analyst Rob Ginsberg, pointing to the asset class’s 22-year lows versus the S&P 500.

But after this week, the analyst expects a turning point.

“Timing these things is a futile effort, and Small Caps have continued to plunge to new relative lows, but if this rally is for real and the bottom is in, its tough to see outperformance not finally coming with it,” he wrote. “While the likes of the S&P and NASDAQ have seen rallies of their own, we are much more inclined to buy into Small Caps at this point, which have a much longer runway for upside in our view, rather than chase the likes of overbought large cap names.”

— Lisa Kailai Han

The ongoing market rally could boost stocks into year-end, according to Meera Pandit, global market strategist at JPMorgan Asset Management.

Good economic news throughout the fall was responsible for pushing yields up and stocks down, the strategist said. A dramatic slowdown, combined with negative economic data, would hurt stocks and bonds going forward.

“So right now [we’re] in the Goldilocks scenario, where we’re kind of right down the middle with more moderate news that’s really supporting the market and could support the market into year-end,” Pandit told CNBC’s “Squawk Box” on Thursday morning.

She added that she does not expect to see a slowdown in U.S. consumers until the jobs market noticeably weakens.

— Lisa Kailai Han

The risk of further pressure to Palo Alto Networks‘ billings and free cash flow has pushed Bank of America to the sidelines.

Analyst Tal Liani downgraded the technology stock to neutral from buy and slashed his price target by $25 to $265. His new target implies an upside of just 3.4% over where the stock finished Wednesday.

“The high bar of expectations suggests risk of further deterioration to billings, in our view, but also a possible negative impact on FCF and challenges to hit the long-term growth targets,” Liani told clients on Thursday.

The downgrade comes a day after the company offered weaker-than-expected billings guidance. Still, CEO Nikesh Arora said on CNBC that demand remained strong.

Shares dropped nearly 7% in Thursday’s session as investors parsed the guidance and quarterly report.

Individual investor enthusiasm for stocks inched higher in the latest week, reaching the highest since early August, after an explosive rebound in the prior survey, according to the latest reading from the American Association of Individual Investors.

Bullishness toward stocks over the next six months rose to 43.8% from 42.6% last week and just 24.3% two weeks ago. But bearishness also expanded a touch, to 28.1% from 27.2% last week, (albeit far below the 50.3% that prevailed two week ago). Investors’ neutral opinion on the outlook for stocks narrowed to 28.1% from 30.2%.

Bullishness stands above the historic average of 37.5%, while bearishness and neutral sentiment are below the historic averages, at 31.0% and 31.5%, respectively.

Rising bullishness and shrinking bearishness can raise red flags for contrarian investors who believe that greater enthusiasm can mean the bulk of buying is behind the market and cash reserves have fallen.

— Scott Schnipper

The United Auto Workers’ record deal with General Motors has been ratified by a majority of workers, according to voting results posted Thursday morning by the union.

According to the UAW’s vote tracker, the deal was supported by roughly 54% of the more than 34,700 autoworkers at GM who voted. Results from two smaller GM facilities representing about 1,400 workers, are still outstanding, but cannot offset the roughly 2,500-vote margin.

GM shares were lower by more than 1% midday.

— Michael Wayland, Tanaya Macheel

The S&P 500 utilities sector was far and away the best performer Thursday, rising about 1% as Treasury yields fell broadly. Duke Energy, Southern Co. and NRG Energy rose more than 1% each to lead utilities higher.

Energy, however, struggled, losing 2% as oil prices dropped sharply. APA fell 4.4%, while Baker Hughes and Halliburton dipped 3% to lead the decline.

— Fred Imbert

U.S.-traded shares of major European luxury companies fell Thursday during premarket trading, following Burberry‘s worse-than-expected quarterly results.

The British fashion retailer reported that comparable store sales growth slowed 18% from the previous quarter due to slowing momentum in China. The company also warned that it is unlikely to reach its previously-stated revenue guidance if weaker demand globally persists.

Burberry’s U.S.-listed shares declined 9.3% Thursday morning. The dismal results also brought down other luxury companies. U.S.-traded shares of LVMH and Kering fell 1.7% and 1.8%, respectively. Burberry and Kering are now down 22.1% and 17.9% year to date, respectively. LVMH remains positive by 5.7% in 2023.