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U.S. stocks on Thursday fell as investors digested more jobs data which pointed to a highly resilient labor market that paves the way for the Federal Reserve to stick to its aggressive path of rate hikes.
By mid-day, the tech-heavy Nasdaq Composite (COMP.IND) declined 1.19% to 10,334.57 points. The benchmark S&P 500 (SP500) fell 1.17% to 3,807.76 points, while the blue-chip Dow (DJI) retreated 1.24% to 32,856.78 points.
Of the 11 S&P sectors, ten were trading in the red, led by Real Estate and Utilities. Energy was the only gainer.
In the main economic news of the day, the latest ADP jobs report showed that the U.S. added 235K jobs in December, compared to the anticipated figure of 145K. Furthermore, the number of Americans filing for initial jobless claims fell by 19K to 204K versus the expected figure of 225K.
Both sets of data continued to point to suggest a tight labor market. The Fed is keeping a close eye on jobs data to determine its future path of rate hikes.
The minutes of the Fed’s December monetary policy meeting released on Wednesday showed that policymakers were still very concerned about high inflation and the resilience showed by the labor market.
On the other hand, goods and services trade data came in at -$61.50B versus the -$73.0B expected data point, while the S&P global composite PMI final data came in at 45, above the consensus 44.6. The S&P global services PMI final came in at 44.7 above the anticipated 44.4 number. The numbers hinted at signs that the economy is cooling.
Turning to the bond markets, Treasury yields pared some of their gains. The U.S. 10-Year Treasury yield (US10Y) was up 1 basis point to 3.72%, and the 2-Year Treasury yield (US2Y) was up 5 basis points to 4.44%.
JPMorgan highlighted in an investor note: “We expect market volatility to remain elevated with another round of sharp declines in equities.”
“More precisely, in 1H23 we expect S&P 500 to re-test this year’s lows as the Fed overtightens into weaker fundamentals. This sell-off combined with disinflation, rising unemployment, and declining corporate sentiment should be enough for the Fed to start signaling a pivot, subsequently driving an asset recovery, and pushing S&P 500 to 4,200 by year-end 2023.”
Among active stocks, Bed, Bath & Beyond was the top percentage loser on the Nasdaq Composite (COMP.IND) after it issued a “going concern” warning.
Pharmacy giant Walgreens Boots Alliance (WBA) was the top percentage loser on both the S&P 500 (SP500) and the Dow (DJI), despite reporting quarterly earnings that beat expectations and raising its long-term guidance for its U.S. healthcare segment.
Lamb Weston (LW) was the top S&P percentage gainer as investors cheered its quarterly results.
