U.S. stocks were trading lower Thursday morning as investors reacted to a fresh batch of labor-market data and more hawkish commentary from Federal Reserve officials.
How are stocks trading
- The S&P 500 SPX, -1.22% fell 34 points, or 0.9%, to 3,818.
- The Dow Jones Industrial Average DJIA, -1.29% shed 292 points, or 0.9%, to 32,976.
- The Nasdaq Composite COMP, -4.08% declined 99 points, or 1%, to 10,359.
On Wednesday, the Dow Jones Industrial Average rose 133 points, or 0.4%, to 33270, the S&P 500 increased 29 points, or 0.75%, to 3853, and the Nasdaq Composite gained 72 points, or 0.69%, to 10459. Wednesday’s gain cemented a meager Santa Claus rally for stocks, as MarketWatch reported.
The S&P 500 is on track to finish Friday with another weekly decline, what would be its fifth such loss in a row, the longest such streak since last spring.
What’s driving markets
Markets were not impressed with the latest batch of data about the U.S. labor market which suggested that employment has been undisturbed by the Fed’s most aggressive interest-rate hikes in about four decades.
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’ pay.
Initial jobless benefit claims also declined last week to 204,000, the lowest level since September. Data on job openings released Wednesday showed more than 10 million job openings in the U.S., another sign that the labor market remains unperturbed despite the Fed’s rate hikes and layoffs by financial and technology firms.
On Friday, investors will receive the monthly nonfarm payrolls report for December from the U.S. Labor Department.
“While we will get a better overall picture of the jobs market tomorrow, private payrolls beating expectations and jobless claims coming in below are indications that the labor market remains resilient,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
Signs of strong wage growth and labor-market activity are bad news for stocks, said Art Hogan, chief market strategist at B.Riley Wealth.
Fed Chairman Jerome Powell has said that the labor market must weaken to prevent strong wage gains for workers from fueling inflation.
“As long as we’re still in a rate-hiking cycle, good economic data is going to be bad news for markets,” Hogan said in a phone interview with MarketWatch.
Adding a layer of complexity to the state of the labor market, news of mass layoffs at Amazon.com Inc. AMZN, -2.00% and Salesforce Inc. CRM, -2.90% were the latest in a drumbeat of technology sector job cuts.
Hawkish comments from senior Fed officials also impacted stocks on Thursday.
Kansas City Federal Reserve Bank President Esther George spoke on CNBC Thursday to say she had raised her forecast for the fed-funds rate to above 5% and expects it to stay there for some time as the central bank continues its fight against inflation.
Her comments echoed the hawkish tone from Minneapolis Fed President Neel Kashkari, who shared his outlook in a blog post on Wednesday, as well as the minutes from the Fed’s December meeting which showed the central bank is generally not happy with markets’ response to its rate hikes.
Shortly after the open, energy was the only S&P 500 sector in the green, bolstered by higher crude oil prices.
Higher bond yields also weighed on stocks, market strategists said, as the yield on the 10-year note TMUBMUSD10Y, 3.745% rose 6.2 basis points to 3.772%, reversing some of its declines from the past few sessions.
Companies in focus
- Walgreens Boots Alliance WBA, -7.58% stock fell even after the drugstore chain reported fiscal first quarter earnings that beat analyst estimates and raised its full-year revenue outlook partly due to its U.S. health care segment’s acquisition of Summit Health.
- Amazon AMZN, -2.00% rose after undefined announcing it’s cutting 18,000 jobs or about 1% of its workforce, becoming the latest technology company to cut back after expanding rapidly during the pandemic.
- Silvergate Capital SI, -48.02% slumped after it said digital asset deposits tumbled by $ 8.1 billion from Sep. 30 through the end of the year to just $ 3.8 billion in the wake of the collapse of crypto exchange FTX which sparked a run forcing the bank to sell assets at a steep loss to cover some $ 8.1 billion in withdrawals. The bank said it was forced to sell $ 5.2 billion in debt to cover withdrawals and recorded a in a $ 718 million loss in the fourth quarter on that sale.
- Shares of other lenders with ties to the crypto industry also declined, including SVB Financial Group SIVB, -5.92% and Signature Bank SBNY, -4.55%.