Dow Down 300 Points As Stocks Cut Losses In Midday Trade After Jobs Data, Hawkish Fed Talks Hammer Stocks

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US stocks were lower on Thursday, but bottomed out during afternoon trading as investors reacted to a new batch of labor market data and more aggressive commentary from Federal Reserve officials.

How’s the stock trading going
  • The S&P 500 SPX,
    -0.74%
    fell 31 points, or 0.8%, to 3,820.

  • The Dow Jones Industrial Average DJIA,
    -0.76%
    lost 308 points, or 0.9%, to 32,961.

  • The Nasdaq Composite COMP,
    -2.65%
    fell 114 points, or 1.1%, to 10,344.

On Wednesday, the Dow Jones Industrial Average rose 133 points, or 0.4%, to 33,270, the S&P 500 rose 29 points, or 0.75%, to 3,853, and the Nasdaq Composite gained 72 points, or 0.69 %, up to 10,459. Wednesday’s earnings confirmed a meager Santa Claus rally for stocks, as MarketWatch reported.

The S&P 500 is on track to end Friday with another weekly decline, which would be its fifth consecutive loss, the longest streak since last spring.

What drives markets

Labor market data released Thursday suggested employment remains healthy despite the Fed’s most aggressive rate hikes in about four decades and despite news of mass layoffs at Amazon.com Inc. AMZN, Salesforce Inc. CRM, Genesis Global Trading Inc. and other technology companies.

ADP private payrolls data showed 235,000 jobs were created in December, beating expectations for 153,000 new jobs, according to economists polled by The Wall Street Journal. The data also showed large increases in workers’ wages.

Initial unemployment claims also fell to 204,000 last week, the lowest level since September. Data on job openings released on Wednesday showed more than 10 million job openings in the US, another sign that the job market remains unflappable despite the Fed’s rate hikes and layoffs by financial and technology firms.

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The reaction in stocks and bond yields was the most recent example of the “good news is bad news” dynamic playing out in the markets.

“As long as we are still in a rate hike cycle, good economic data will be bad news for the markets,” said Art Hogan, chief market strategist at B.Riley Wealth, in a telephone interview with MarketWatch.

On Friday, investors will receive the monthly nonfarm salary report for December from the US Labor Department.

To see: US job growth slowed to 200,000 in December, but that’s still too much for the Fed

“While we will get a better overall picture of the job market tomorrow, private payrolls beating expectations and unemployment claims coming in lower are indications that the labor market remains resilient,” said Mike Loewengart, chief model portfolio construction at Morgan Stanley Global Investment Office.

Comerica Bank chief economist Bill Adams expects the December jobs report to show the unemployment rate unchanged for the month at 3.7% and 203,000 nonfarm payroll jobs added as of November.

“The unemployment rate has been held low in recent months by the ‘triple epidemic’ of flu, Covid and RSV infections, which keep potential job seekers out of the workforce and keep measured unemployment low,” he said in emailed comments Thursday. . . “The government does not count as unemployed people who are not working but not looking for work because they are sick, take care of sick children or babysit children whose kindergarten is understaffed.”

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However, Adams predicts that the unemployment rate will rise to around 4.5% by mid-2023, reflecting both the reduction in seasonal illnesses and a broad-based weakening of the economy.

Fed Chairman Jerome Powell has said the labor market must weaken to prevent strong wage increases for workers from fueling inflation.

Hawkish remarks from senior Fed officials also affected stock prices on Thursday.

Kansas City Federal Reserve Bank President Esther George spoke on TBEN Thursday to say she had raised her forecast for the Fed Funds rate to above 5% and expects it to stay that way for some time as the central bank continues its fight against inflation. Meanwhile, Raphael Bostic, president of the Atlanta Fed, also said on Thursday that the central bank still has “a lot of work to do” to contain inflation.

Her comments echoed the hawkish tone of Minneapolis Fed president Neel Kashkari, who shared his views in a blog post Wednesday, as well as the minutes of the Fed’s December meeting, which showed the central bank is not generally happy with the reaction of the markets to its interest rates. walks.

James Bullard, chairman of the St. Louis Federal Reserve, said Thursday afternoon that high inflation is likely to ease in 2023. .

Higher bond yields and a strong dollar also weighed on equities. The yield on the 10-year bond TMUBMUSD10Y,
3.720%
rose 6.2 basis points to 3.772%, reversing some of the declines of the past few sessions. The ICE US Dollar Index DXY,
+0.77%,
a gauge of the dollar’s strength against a basket of major currencies, gained 0.7% at 104.98.

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Companies in the picture
  • Walgreens Boots Alliance
    WBA,
    -6.48%
    the stock fell 6.8% even after the drugstore chain reported first-quarter earnings that beat analysts’ estimates and boosted its full-year revenue outlook, in part due to the U.S. healthcare segment’s acquisition of Summit Health .

  • Amazon
    AMZN,
    -1.27%
    was 1.5% lower after undefined
    announces it is cutting 18,000 jobs or about 1% of its workforce, becoming the latest tech company to cut spending after rapid expansion during the pandemic.

  • Silvergate capital
    SI,
    -40.73%
    fell 41.8% after it said digital asset deposits fell $8.1 billion to just $3.8 billion from September 30 to year-end in the wake of the collapse of crypto exchange FTX, which led to a run that forced the bank to sell assets at a steep loss to cover about $8.1 billion in withdrawals. The bank said it was forced to sell $5.2 billion in debt to cover withdrawals and posted a $718 million loss on those sales in the fourth quarter.

  • Shares of other lenders with ties to the crypto industry also fell, including SVB Financial Group
    SIVB,
    -2.77%
    and signature bank
    SBNY,
    -5.22%,
    which fell more than 3.5% respectively.

  • Stitch Fix Inc.
    SFIX,
    +8.59%
    shares rose 8.9% as the company announced plans to cut its salaried workforce by 20%.

– Jamie Chisholm contributed to this article