- US personal wage bills rise more than expected
- Weekly initial jobless claims fall
- Tesla falls as sales of Chinese-made vehicles fall
- Indices down: Dow 1.02%, S&P 1.16%, Nasdaq 1.47%
Jan 5 (Portal) – Wall Street’s main indices shed more than 1% on Thursday, with Nasdaq leading the declines as signs of a tight labor market dashed hopes that the Federal Reserve could interrupt its rating-raising cycle at any time if she continues to focus on inflation.
Thursday’s ADP National Employment Report showed a higher-than-expected increase in private employment in December. Another report showed that weekly jobless claims fell last week.
On Wednesday, another record showed a modest decline in US job vacancies. While a strong job market would normally be hailed as a sign of economic strength, investors currently see this as a reason for the Fed to keep interest rates high.
“It is quite clear that good news in the labor market means bad news for the stock market. The data shows the job market is very resilient,” said Anthony Saglimbene, chief market strategist at Ameriprise in Tory, Michigan.
“As long as the jobs market is resilient, the Federal Reserve must continue to tighten financial conditions to bring inflation down,” said this strategist, who expects investors to focus heavily on wage inflation in Friday’s jobs report.
The Dow Jones Industrial Average (.DJI) fell 339.69 points, or 1.02%, to 32,930.08, the S&P 500 (.SPX) lost 44.87 points, or 1.16%, to 3,808.1 and the Nasdaq Composite (.IXIC) fell 153.52 points, or 1.47%, to 10,305.24.
Indexes lost steam late in the day, closing near their session lows. They had pared losses earlier this afternoon, when James Bullard, chairman of the St. Louis Federal Reserve, said 2023 could finally bring some welcome relief on the inflation front.
While Saglimbene noted that Bullard’s comments were not surprising, his suggestion that rate hikes were showing signs of dampening inflation provided some reassurance.
Among the S&P’s 11 major sectors, real estate (.SPLRCR) – which was Wednesday’s biggest gainer by percentage – led Thursday’s sector losses down 2.9%, followed by utilities (.SPLRCU) down 2.2% %.
The only winner was Energy (.SPNY), which closed up 1.99% after crude oil futures settled higher.
On Wednesday, Wall Street’s main indices erased some of their gains after minutes of the Fed’s December meeting showed officials laser-focused on fighting inflation, though they agreed to slow the pace of increases to address economic risks to limit.
Earlier Thursday, both Kansas City Fed Chair Esther George and Atlanta President Raphael Bostic emphasized that the central bank’s priority is to contain inflation by tightening monetary policy.
Traders see interest rates peaking at just over 5% in June.
The broader nonfarm payrolls report, due Friday, will be scrutinized for further clues on labor demand and the trajectory of rate hikes.
Among individual stocks, Tesla Inc (TSLA.O) ended down 2.9% after sales of its Chinese-made electric vehicles fell to a five-month low in December, while Amazon.com Inc (AMZN.O) fell after its announcement 2.4% decreased increased redundancy plans.
Walgreens Boots Alliance Inc (WBA.O) ended down 6% at $35.19 after the drugstore chain posted a quarterly loss on an opioid-related lawsuit.
Bed Bath & Beyond Inc (BBBY.O) shares plunged 29.9% to $1.69 after the homewares retailer said it was reviewing options, including bankruptcy.
Declining issues predominated on the NYSE at a 1.58 to 1 ratio; on the Nasdaq, a 1.44-to-1 ratio favored relegators.
The S&P 500 posted 8 new 52-week highs and 7 new lows; the Nasdaq Composite posted 68 new highs and 66 new lows.
10.21 billion shares changed hands on US exchanges compared to 10.79 billion moving average over the last 20 trading days.
Reporting by Sinéad Carew in New York, Shubham Batra, Bansari Mayur Kamdar and Ankika Biswas in Bengaluru; Edited by Arun Koyyur, Shounak Dasgupta and David Gregorio
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