By Stephen Culp NEW YORK (Reuters) -U.S. stocks ended in negative territory on Thursday as investors, left with no economic data or any sentiment-swaying catalysts, took the opportunity to consolidate ahead of third-quarter earnings season. The S&P 500 and the Nasdaq inched back from Wednesday's record closing highs, while the blue-chip Dow closed with the deepest percentage decline. "The earnings cycle is upon us and there's a wait-and-see in terms of whether we’ll see the same level of consistency of earnings growth in the coming quarter that we've seen in the last two quarters," said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. "Couple that with the uncertainty surrounding the lack of data coming out of Washington and how the Fed navigates that, it's natural to see a bit of a pullback." The stock market's pause comes amid a steep rally that has been largely driven by the rise of artificial intelligence technology. The runup has prompted concerns that a bubble is forming, which could be a harbinger of an impending correction. Sunday will mark the current bull market's third anniversary; the benchmark S&P 500 touched the nadir of its current market cycle on October 12, 2022 on the heels of monetary tightening from the Fed. Over that time period, while tech and tech-adjacent megastocks have driven the index nearly 90% higher, history suggests the current bull market has more gas in its tank. The U.S. government shutdown entered its ninth day, with few signs of progress. Consequently, market participants continue to be deprived of essential economic data. And with the start of third-quarter earnings season just days away, the scarcity of market-moving catalysts is focusing investors' attention on remarks from monetary policymakers for clues regarding the central bank's rate cut intentions through the end of the year. New York Federal Reserve President John Williams favors more interest rate reductions before year-end due to risks facing the weakening labor market, he said in an interview with the New York Times published on Thursday. Financial markets are currently pricing in a 94.6% likelihood that the Fed will implement a 25 basis-point interest rate cut at the conclusion of its October 28-29 meeting, according to CME's FedWatch tool. The Dow Jones Industrial Average fell 243.36 points, or 0.52%, to 46,358.42, the S&P 500 lost 18.61 points, or 0.28%, to 6,735.11 and the Nasdaq Composite lost 18.75 points, or 0.08%, to 23,024.63. Among the 11 major sectors of the S&P 500, materials suffered the biggest drop, while consumer staples were the sole gainers. Housing and homebuilding were among the clear underperformers, both off more than 2% amid margin and demand worries. On Tuesday of next week, JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo are slated to report quarterly results, marking the unofficial launch of third-quarter earnings season. Analysts currently predict year-on-year S&P 500 earnings growth of 8.8% in the July-September period, weaker than the second quarter's 13.8% and the year-ago quarter's 9.1% annual growth, according to the most recent data from LSEG. Delta Air Lines provided an upbeat forecast for the current quarter, after posting stronger-than-expected third-quarter earnings. The airline's shares jumped 4.3%. Other U.S. carriers also gained, boosting the S&P 1500 Airlines index by 1.9%. U.S. retailer Costco Wholesale rose 3.1%, after reporting September sales data. Shares of Albemarle increased 5.3% after brokerage TD Cowen raised its price target on the lithium producer and as China tightened export controls on rare earths. Declining issues outnumbered advancers by a 2.91-to-1 ratio on the NYSE. There were 354 new highs and 91 new lows on the NYSE. On the Nasdaq, 1,694 stocks rose and 2,966 fell as declining issues outnumbered advancers by a 1.75-to-1 ratio. The S&P 500 posted 20 new 52-week highs and 11 new lows while the Nasdaq Composite recorded 133 new highs and 66 new lows. Volume on U.S. exchanges was 20.44 billion shares, compared with the 19.75 billion average for the full session over the last 20 trading days. (Reporting by Stephen Culp in New York; Additional reporting by Lewis Krauskopf in New York and Niket Nishant and Sukriti Gupta in Bengaluru; Editing by Matthew Lewis)
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