4.12pm: Robust jobs data adds to rate concerns
US markets endured another tough day as strong jobs data and hawkish comments from a Fed official cemented investor concerns that more interest rate rises are to come.
At the close the Dow Jones Industrial Average was down 340 points, or 1.02%, at 32,930, the S&P 500 fell 45 points, or 1.16%, to 3,808 and the Nasdaq Composite dipped 154 points, or 1.47%, to 10,305.
The ADP jobs report came in much stronger-than-expected while weekly jobless claims numbers were weaker than forecast both signalling that the jobs market remains robust. Further evidence will come tomorrow with the much-watched non-farm payrolls figures.
“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 of Morgan Stanley Global Investment Office.
“These come on the heels of big-name companies announcing sizable job cuts so there is no doubt the market’s pressures are weighing on companies, but it remains to be seen when hiring will slow demonstrably,” he added.
Esther George, president and chief executive of the Federal Reserve Bank of Kansas City, told CNBC that she favoured holding rates above 5% for some time.
“I’ll be over 5% and I see us staying there for some time until we get the signals that inflation is really convincingly starting to fall back towards our 2% goal” she said.
Stocks on the move included Walgreens Boots Alliance which slumped 7.1% after earnings showed a $5.2 billion opioid litigation settlement drove a quarterly loss while Bed, Bath & Beyond shed 24% after saying it was short on cash and considering bankruptcy.
12:16pm: Investors expecting more interest rate hikes
At midday, the Dow was down 362 points, 1.1%, to 32,908, the Nasdaq Composite lost 106 points, 1%, to 10,353 and the S&P 500 fell 39 points, 1%, to 3,814.
"US markets have slipped back on the open after the latest ADP employment numbers, and weekly jobless claims came in better than expected," said Michael Hewson, chief market analyst at CMC Markets UK.
"...The resilience of these numbers has lent support to the idea that we will probably see the Fed hike rates by another 50bps at the start of February pushing the funds rate up to 5%," he continued.
Investors have not taken the news kindly, as the indexes are all facing major declines.
Tomorrow, investors will be watching for updated data on employment and hourly wages.
9.35am: Private sector employment data surprises
US stocks slipped at the open on Thursday as private sector payroll data for December has indicated that the labor market remains strong.
ADP reported a 235,000 increase in private payrolls, well above the consensus analyst expectation per The Wall Street Journal of 153,000.
The release of the Fed’s December meeting minutes yesterday may have dampened sentiment according to OANDA market analyst Craig Erlam.
“The narrative from the central bank is very much in line with what we should expect,” he said. “Policymakers are desperately trying to convince markets how serious they are about defeating inflation, to the point that investors are seemingly paying less attention.”
Tech layoffs, with Salesforce and Amazon the latest companies to announce cost-cutting measures, are also in focus.
“The economic cycle has turned rapidly leaving those companies over-staffed and while that would ideally not result in mass lay-offs, it was always likely to,” Erlam commented.
“While other sectors may also gradually start laying off staff in response to the economic downturn, I don't expect it will be on the same scale, not unless the outlook worsens considerably.”
Just after the market opened, the Dow Jones Industrial Average had shed 299 points or 0.9% at 32,971 points, the S&P 500 was down 33 points or 0.9% at 3,820 points, and the Nasdaq Composite had lost 112 points or 1.1% at 10,347 points.
Meanwhile, meme stock Bed Bath & Beyond Inc had tanked about 20.7% following a warning from the struggling company that bankruptcy is on the table.
6.30am: House deadlock and jobs data in focus
Wall Street is expected to open higher as traders continue to digest minutes from the last Federal Open Market Committee (FOMC) meeting of 2022, while Republicans remain deadlocked over the election of a speaker for the US House of Representatives.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.1% in Thursday pre-market trading, while those for the broader S&P 500 index also gained 0.1% and contracts for the Nasdaq-100 added 0.2%.
Minutes of the December FOMC meeting show Federal Reserve officials remain committed to fighting inflation and expect higher interest rates to stay in place until more progress is made. After initially declining on the release of the minutes, stocks turned around to end Wednesday higher.
At the close the DJIA was up 0.4% to 33,270, the S&P 500 rose 0.8% to 3,853, while the Nasdaq Composite advanced 0.7% to 10,459.
As well as the Fed’s hawkish stance, traders are also contemplating the possibility of another upbeat set of US non-farm payrolls tomorrow, commented James Hughes, chief market analyst at Scope Markets.
“However, the literal elephant in the room here is the ongoing tussle by Republicans in Washington to elect a house speaker,” Hughes said. “Whilst common consensus may be that political gridlock is good because it prevents businesses being blindsided by policy change, the US debt ceiling needs to be lifted again by the summer so lawmakers need to get down to business.”
House GOP leader Kevin McCarthy has suffered defeat in six rounds of voting across two days, with the House approving a motion to adjourn until noon today. The House cannot kick off the new Congress or swear in new members until a speaker is elected.
Hughes noted that ADP private payrolls data is due before the opening bell, whilst two Fed policymakers are due to give speeches later in the session.
“Any nuance here over the extent of policy tightening is likely to be closely followed, with risk potentially on the upside if any dovish tones emerge,” he added.