The numbers: Job openings in the U.S. fell slightly to 10.46 million in November, but workers were still quitting in droves in a sign the labor market remains quite strong — too strong for the Federal Reserve.
The number of job openings is seen as a cue on the health of the labor market and broader U.S. economy. Job postings have slowly receded since hitting an all-time high of 11.9 million last spring.
The jobs market is still too hot for the Fed, however. The Fed is worried high inflation will persist unless hiring slows and a rapid increase in wages tapers off.
There were 1.7 job openings for each unemployed worker in November, well above pre-pandemic levels of 1.2. The Fed is watching that ratio closely and wants to see if fall back to pre-pandemic norms.
Key details: The number of people hired in November dipped to 6.06 million, marking the smallest increase since February 2021.
Rising interest rates, a slowing economy and worries about recession have spurred businesses to fill fewer open jobs.
Yet the number of job quitters edged up to 4.17 million. Quits have topped 4 million for a record 18 months in a row. People quit more often when they think it’s easy to get a better job.
The so-called quits rate among private-sector workers rose to 3% from 2.9%. It peaked at 3.4% near the end of 2021.
Big picture: The Fed is raising interest rates to slow the economy and reduce the demand for labor as part of a broader strategy to rein in the worst inflation in 40 years.
Fed officials say the appetite for labor is still too strong and needs to slacken. The ratio of job openings to unemployed workers has slipped from a record 2.0 last spring, but that’s still too high for the central bank.
Market reaction: The Dow Jones Industrial Average DJIA, -0.03%
and S&P 500 SPX, +0.13%
fell after the job-openings report.
U.S. stock indexes finished sharply higher on Thursday, the second-to-last trading session of the year, with the Nasdaq Composite jumping 2.6%, erasing losses from earlier in the week.
The three main indexes built on premarket gains after U.S. weekly jobless claims data showed the number of workers receiving benefits has climbed to the highest level since February, a tentative sign that the Federal Reserve’s interest-rate hikes might be slowing economic growth and inflation.
How stocks traded
The S&P 500 SPX, +1.75%
rose 66.06 points, or 1.8%, to end at 3,849.28.
Dow Jones Industrial Average DJIA, +1.05%
added 345.09 points, or 1.1%, finishing at 33,220.80.
Nasdaq Composite COMP, +2.59%
climbed 264.80 points, or 2.6%, to finish at 10,478.09.
On Wednesday, the Nasdaq Composite dropped 1.4% to 10,213, its lowest closing level of the year. The S&P 500 is up more than 6% from its 2022 low from mid-October, but the large-cap index remains down 19.2% year-to-date, FactSet data show.
What drove markets
The penultimate session of 2022 showed tentative signs of delivering some much needed festive cheer for the stock market as a hope for “Santa Claus rally” had earlier failed to materialize.
The jobless-claims data “points to a loosening in the labor market, which is welcome news for the Fed,” said Larry Adam, chief investment officer at Raymond James, in a tweet.
However, analysts at Citi still think the claims data indicates a still-very-tight labor markets compared to historical levels.
“While both initial and continuing claims increased this week, they remain within the levels of late 2019,” wrote Gisela Hoxha, U.S. economics research analyst at Citi. “Anecdotes of company layoffs have increased in recent months, particularly in the tech sector. While it could be hard to disentangle the seasonal effects from the announced layoffs, in our view there is no significant evidence of them showing up in the claims data yet.”
Some of those layoffs could be taking effect a couple months later as employees might be kept on payroll for some time after the announcement, which will become significant signs of weakness in the labor market in 2023, Hoxha added.
Stocks were on track to finish what’s set to be the worst year since 2008 not far from 2022 lows. The S&P 500’s 52-week closing low at 3,577.03 was hit on Oct. 12.
Still, the three indexes managed to erase losses from earlier in the week on Thursday. Nasdaq Composite was down 0.2% this week, while the S&P 500 gained 0.1% and the Dow was nearly flat as of Thursday’s close. If the S&P 500 can hold on to weekly gains through Friday, it would mark the end of a three-week losing streak that has been the index’s longest since September, FactSet data show.
Companies in focus
Tesla Inc. TSLA, +8.08%
shares finished 8.1% higher on Thursday after posting its first rise in eight sessions Wednesday. The electric-vehicle maker’s shares had declined in seven consecutive sessions, their worst losing streak since a seven-session run that ended on Sept. 15, 2018.
Southwest Airlines LUV, +3.70%
remains in focus as the airline tries to recover from logistical issues that caused thousands of flight cancellations over the past week. The stock fell 11% over the past two days, but rose 3.7% in Thursday session.
General Electric’s GE, +2.17%
spinoff of GE HealthCare Technologies will join the S&P 500 index when it begins trading as a separate public company on Jan. 4. GE HealthCare will replace Vornado Realty Trust VNO, +1.63%,
which will move to the S&P MidCap 400. Vornado will replace logistics company RXO RXO, +8.39%,
which will move to the S&P SmallCap 600. GE HealthCare — trading on a when-issued basis — rose 0.9%, while Vornado gained 1.6% and RXO jumped 8.4%.
Cal-Maine CALM, -14.50%
shares ended 14.5% lower after its quarterly earnings came in below Wall Street forecasts. Cal-Maine reported record sales for the quarter as an avian flu outbreak continued to limit the supply of eggs, driving prices sharply higher. The company also said there were no positive tests for avian flu at any of its production facilities, as of Wednesday.
U.S. stock indexes finished sharply higher on Thursday, the second-to-last trading session of the year, with the Nasdaq Composite jumping 2.6%, erasing losses from earlier in the week.
The three main indexes built on premarket gains after U.S. weekly jobless claims data showed the number of workers receiving benefits has climbed to the highest level since February, a tentative sign that the Federal Reserve’s interest-rate hikes might be slowing economic growth and inflation.
How stocks traded
The S&P 500 SPX, +1.75%
rose 66.06 points, or 1.8%, to end at 3,849.28.
Dow Jones Industrial Average DJIA, +1.05%
added 345.09 points, or 1.1%, finishing at 33,220.80.
Nasdaq Composite COMP, +2.59%
climbed 264.80 points, or 2.6%, to finish at 10,478.09.
On Wednesday, the Nasdaq Composite dropped 1.4% to 10,213, its lowest closing level of the year. The S&P 500 is up more than 6% from its 2022 low from mid-October, but the large-cap index remains down 19.2% year-to-date, FactSet data show.
What drove markets
The penultimate session of 2022 showed tentative signs of delivering some much needed festive cheer for the stock market as a hope for “Santa Claus rally” had earlier failed to materialize.
The jobless-claims data “points to a loosening in the labor market, which is welcome news for the Fed,” said Larry Adam, chief investment officer at Raymond James, in a tweet.
However, analysts at Citi still think the claims data indicates a still-very-tight labor markets compared to historical levels.
“While both initial and continuing claims increased this week, they remain within the levels of late 2019,” wrote Gisela Hoxha, U.S. economics research analyst at Citi. “Anecdotes of company layoffs have increased in recent months, particularly in the tech sector. While it could be hard to disentangle the seasonal effects from the announced layoffs, in our view there is no significant evidence of them showing up in the claims data yet.”
Some of those layoffs could be taking effect a couple months later as employees might be kept on payroll for some time after the announcement, which will become significant signs of weakness in the labor market in 2023, Hoxha added.
Stocks were on track to finish what’s set to be the worst year since 2008 not far from 2022 lows. The S&P 500’s 52-week closing low at 3,577.03 was hit on Oct. 12.
Still, the three indexes managed to erase losses from earlier in the week on Thursday. Nasdaq Composite was down 0.2% this week, while the S&P 500 gained 0.1% and the Dow was nearly flat as of Thursday’s close. If the S&P 500 can hold on to weekly gains through Friday, it would mark the end of a three-week losing streak that has been the index’s longest since September, FactSet data show.
Companies in focus
Tesla Inc. TSLA, +8.08%
shares finished 8.1% higher on Thursday after posting its first rise in eight sessions Wednesday. The electric-vehicle maker’s shares had declined in seven consecutive sessions, their worst losing streak since a seven-session run that ended on Sept. 15, 2018.
Southwest Airlines LUV, +3.70%
remains in focus as the airline tries to recover from logistical issues that caused thousands of flight cancellations over the past week. The stock fell 11% over the past two days, but rose 3.7% in Thursday session.
General Electric’s GE, +2.17%
spinoff of GE HealthCare Technologies will join the S&P 500 index when it begins trading as a separate public company on Jan. 4. GE HealthCare will replace Vornado Realty Trust VNO, +1.63%,
which will move to the S&P MidCap 400. Vornado will replace logistics company RXO RXO, +8.39%,
which will move to the S&P SmallCap 600. GE HealthCare — trading on a when-issued basis — rose 0.9%, while Vornado gained 1.6% and RXO jumped 8.4%.
Cal-Maine CALM, -14.50%
shares ended 14.5% lower after its quarterly earnings came in below Wall Street forecasts. Cal-Maine reported record sales for the quarter as an avian flu outbreak continued to limit the supply of eggs, driving prices sharply higher. The company also said there were no positive tests for avian flu at any of its production facilities, as of Wednesday.
The numbers: The number of Americans who applied for unemployment benefits in early December fell to a nearly three-month low of 211,000, indicating layoffs around the holiday season remain low even as the economy softens.
New unemployment filings declined by 20,000 from 231,000 in the prior week, the government said Thursday.
The numbers: The number of Americans who applied for unemployment benefits in early December rose slightly to 230,000, pointing to a slow but steady increase in layoffs as the U.S. economy slows.
Economists polled by the Wall Street Journal had forecast new claims to total 230,000 in the seven days ended Dec 3. The figures are seasonally adjusted.
The number of people applying for jobless benefits is one of the best barometers of whether the economy is getting better or worse. New unemployment filings have gradually risen from a 54-year low of 166,000 last spring , but they are still extremely low.
Economists predict layoffs will rise, however, as rising interest rates orchestrated by the Federal Reserve choke off U.S. growth. The tech sector has already suffered a wave of layoffs and manufacturers are also scaling back.
Big picture: The strongest U.S labor market in decades has now become a double-edged sword.
Rising wages and low unemployment have allowed Americans to meet their needs and spend enough to keep the economy growing.
Yet the fastest wage growth in four decades is now adding to high U.S. inflation and putting more pressure on the Fed to get prices back under control.
The November U.S. jobs report on Friday showed the U.S. economy gained 261,000 jobs last month, with the unemployment rate holding steady at 3.7%.
Economists polled by the Wall Street Journal had expected an addition of 200,000 jobs.
Wages jumped 0.6% in November, double the expected pace.
Below are some initial reactions from economists and other analysts as U.S. stocks DJIA, -0.20%
SPX, -0.37%
traded lower and the yield on the 10-year Treasury note TMUBMUSD10Y, 3.569%
jumped following the data on nonfarm payrolls.
“You probably want to revise your view on inflation and it’s overall dynamic more based on today’s job report than any other data report this entire year. And not in a favorable direction,” The report dashes hopes wage growth was cooling, said Jason Furman, economics professor at Harvard and former Obama White House economist, in a tweet.
“A stronger than expected 263,000 monthly payroll print plus the spike in wages…will reinforce the Fed’s assessment that the labor market remains very overheated, and rates will need to go higher for longer in order to bring it back into balance,” said Krishna Guha, vice chairman of Evercore ISI.
“The Fed will not like the renewed strength in wages,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“The U.S. labor market has lost some momentum this year, but it’s still speeding ahead as we approach the new year. Continue to underestimate the momentum in the U.S. labor market at your own peril. Job gains continue to be added at a pace that would have drawn cheers in 2019. The labor market might encounter some bumps in the road next year, but it’s heading into 2023 cruising,” said Nick Bunker, head of economic research at the Indeed Hiring Lab.
The numbers: The U.S. created a robust 263,000 new jobs in November, a historically strong pace of hiring that’s good for workers but that also threatens to prolong a bout of high U.S. inflation.
The continued rapid gains in hiring have become a big source of angst at the Federal Reserve. Senior central bank officials worry that wage growth stemming from a tight labor market is adding upward pressure to already high U.S. inflation.
The Fed is expected to keep raising interest rates — and pushing the economy closer to recession — until hiring slows, labor shortages ease and wage growth drops off.
U.S. stocks fell in premarket trades and bond yields rose after the report. Economists polled by The Wall Street Journal had forecast a smaller increase in new jobs of 200,000.
The U.S. economy created 263,000 new jobs in November — far more than Wall Street had expected.
Justin Sullivan/Getty Images
The unemployment rate was unchanged at 3.7%, the government said Friday, remaining close to a half-century low.
Hourly pay, meanwhile, rose by a sharp 0.6% last month to an average of $32.82. That’s the biggest advance in 13 months and was far stronger than Wall Street expected.
The increase in wages over the past year climbed to 5.1%, from 4.9% in the prior month. Wages are still rising much faster than they were before the pandemic, when they rose about 2% to 3% a year.
The demand for labor is still strong,” said chief economist Steve Blitz of TS Lombard. “It’s still putting upward pressure on wages.”
The Fed has embarked on a series of increases in U.S. interest rates to try to slow the economy just enough to tame inflation without tipping it into recession.
The bank is trying to bring inflation back down to prepandemic levels of 2% from the current rate of 6%, based on the PCE price index.
“The level of [hiring] is not conducive to getting the base inflation rate back to 2%,” Blitz said.
The tough medicine, senior Fed officials figure, is likely to lift the unemployment rate to as high as 5% by 2023. Some Wall Street analysts believe the jobless rate will go even higher if a recession takes hold, as many are forecasting.
Higher borrowing costs slow growth by depressing consumer spending and business investment, the two key pillars of the economy.
Another potential pressure valve for the economy is also not offering any relief. The share of working-age people in the labor force — known as the labor-force participation rate — fell a tick to 62.1%, marking the third drop in a row.
The lack of people looking for work is another big factor contributing to the labor shortage.
Key details: The increase in employment last month was concentrated in hotels, restaurants and healthcare businesses. Americans have gone back to seeing their doctors and are spending more on travel and entertainment.
Hiring also rose in construction and manufacturing, two areas of the economy that are under more duress, while government employment increased by 42,000.
There were some signs of labor-market softness in the report. Retail employment shrank for the third month in a row, and warehouse and transportation jobs also declined.
Hiring at professional businesses, a leader in employment, rose by a meager 6,000. That’s the smallest increase since April 2021.
Hiring in October and September were little changed after government revisions. The economy added 284,000 jobs in October and 269,000 in September.
Big picture: The economy is slowing, but the labor force is still an oasis of strength.
For the Fed, it’s too much of a good thing. The central bank wants the demand and supply of labor to become more balanced to ease the pressure on wages.
The ongoing labor shortage, however, might be a saving grace for the economy. Many businesses have told the Fed they plan to hold onto more workers than usual even if the economy slows, because it’s been so hard to hire people in the first place.
If that’s the case, the economy might escape a recession altogether or only suffer a short and shallow downturn, some economists say.
Looking ahead: “Job creation continues to top expectations, holding the unemployment rate near half-century lows,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
“The Fed may be closing in on a point that the pace of rate hikes could be stepped down, but the combination of tight labor markets and stubbornly elevated inflation leaves policymakers with a clear directive: keep tightening.”
Market reaction: The Dow Jones Industrial Average DJIA, -0.10%
and S&P 500 SPX, -0.12%
were set to decline sharply in Friday trades.
Hotter-than-expected consumer-price index readings have triggered some of the stock market’s biggest one-day selloffs in 2022, serving to focus investor attention ahead of the latest measure of retail inflation on Thursday.
The September CPI reading from the Bureau of Labor Statistics, which tracks changes in the prices paid by consumers for goods and services, is expected to show an 8.1% rise from a year earlier, slowing from an 8.3% year-over-year rise seen in August, according to a survey of economists by Dow Jones.
The S&P 500 SPX, +0.23%
is down 24.7% year to date through Tuesday, according to Dow Jones Market Data. Most of the single days that are responsible for the decline occurred on or around CPI reports or Fed-related events, said Nicholas Colas,co-founder of DataTrek Research, in a note on Monday. Two of the S&P 500’s nine largest down days this year have come on days when CPI data was released, he noted.
Without those nine down days, the S&P 500 would have been up 8.6% year-to-date through the end of last week, Colas wrote.
For example, the S&P 500 recorded its biggest daily percentage fall since June 2020 last month on CPI reporting day, when the large-cap index shed 177.7 points, or 4.3%. On June 13, the S&P slid 3.9% and ended in a bear market after the May inflation report came in hotter than expected, with CPI hitting a 40-year high. Three days later, the index dropped 3.3% following what was then the Federal Reserve’s largest rate hike since 1994.
“Every time we see large selloffs it means investor confidence has collided with macro uncertainty,” warned Colas. “History shows that valuations suffer when this happens repeatedly. As we see further equity market volatility, keep your expectations for valuations modest. They will bottom when macro news is greeted with a rally that sticks, not one that fades away a few days later.”
Bloomberg reported that JPMorgan’s analysts led by Andrew Tyler expect the stock market to tumble by 5% on Thursday if the inflation gauge comes in above August’s 8.3%. If the result is in line with the consensus, the S&P 500 would fall about 2%. On the flip side, the team forecast any softening inflation below 7.9% will spark an equity rally where the index may jump at least 2%.
However, Aoifinn Devitt, chief investment officer at Moneta, said the market would take the top-line number and react to it.
“I would expect to see a similar reaction to what we saw from Friday’s jobs report, which was a positive number that translates into a negative stock-market reaction,” Devitt told MarketWatch via phone. “Stock prices have adjusted. Earnings have adjusted, so there’s already been this kind of managing of expectations (which) leads me to take up some of this and try to be on the upside for some of these stocks, just because so much of the bad news is already there.”
The September inflation report is expected to show the headline CPI continued moderating as gasoline and commodity prices fell to the February level. But future expectations may have changed after OPEC+ announced last week its decision to cut production by 2 million barrels a day, which may have “lagging effect (on inflation data)“, according to Devitt.
Meanwhile, shelter costs and medical care services, which have been at the core of inflationary pressures and are sticky, are expected to increase by 0.7% on a monthly basis. The core CPI is expected to be running at a year-over-year pace of 6.5%, up from 6.3% in August.
“The bulls are desperate for signs that inflation is set to roll back to the Fed’s target — they may be mistaken, and while headline inflation is expected to fall thanks to a decline in energy, the Fed’s focus has shifted towards core CPI,” said Chris Weston, head of research of Pepperstone, in a Tuesday note.
“This is why core CPI will unlikely roll over anytime soon and why the Fed has made it clear they will hike further and leave the fed fund rate in restrictive territory for an extended period,” he wrote.
U.S. stocks finished mostly lower on Tuesday with the Nasdaq Composite dropping 1.1%, while the S&P 500 shed 0.6% and the Dow Jones Industrial Average DJIA, +0.38%
edged up 0.1%. Stock-index futures pointed to a higher start Wednesday.
U.S. stocks finished sharply lower Friday, but still booked their best weekly gains in a month, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.
Investors also weighed a profit warning at a leading microchip maker ahead of next week’s increase in quarterly earnings results.
What happened
The Dow Jones Industrial Average DJIA, -2.11%
fell 630.15 points, or 2.1%, ending at 29,296.79, but off the session low of 29,142.66.
The S&P 500 SPX, -2.80%
dropped 104.86 points, or 2.8%, closing at 3,639.66.
The Nasdaq Composite COMP, -3.80%
shed 420.91 points, or 3.8%, to finish at 10,652.40.
Stocks posted back-to-back losses, trimming weekly gains, but recorded their best weekly gains since Sept. 9, according to Dow Jones Market Data.
Stocks recorded sharp losses Friday after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.
Still, a powerful rally earlier in the week boosted all three major stock indexes to weekly gains, a departure from three straight weekly losses, according to Dow Jones Market Data.
“It’s manic. We are all on edge,” said Kent Engelke, chief economic strategist at Capitol Securities Management, of the sharp market swings.
“Any piece of good news is a cause for an explosive rally,” Engelke said by phone. On the flip side, he pegged technology-based trading “in an illiquid and emotional market” as exacerbating Friday’s selloff.
“It’s a reflection that people have re-entered the mind-set that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone.
Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.”
In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak.
Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price CL00, +5.37%
gains this week after global crude producers voted to cut monthly production and with the U.S. dollar’s DXY, +0.44%
surge this year against a basket of rival currencies.
U.S. crude oil prices climbed for a fifth day in a row on Friday to settle at $92.64 a barrel, while booking at 16.5% weekly gain.
New York Fed President John Williams said Friday that benchmark interest rates likely need to hit 4.5% over time. The Fed’s policy rate now sits in a 3%-3.25% range, up from a zero-0.25% range a year ago.
The benchmark 10-year Treasury rate TMUBMUSD10Y, 3.889%
climbed to 3.883% Friday, as the key metric used to gauge the affordability of credit for businesses, household and the economy posted 10 straight weeks of gains, according to Dow Jones Market Data.
Investors continued to hope for relief on the inflation front and will be monitoring next week’s release of the September consumer-price index, as well as corporate earnings season as it picks up.
Companies in focus
Twitter Inc. TWTR, -0.43%
shares fell 0.4% Friday after a judge delayed a looming trial between the company and Elon Musk to allow the Tesla Inc. TSLA, -6.32%
CEO more time to close his $44 billion acquisition of the social media platform.
Besides the jobs report, investors weighed a profit warning from microchip maker Advanced Micro Devices Inc.AMD, which said the PC market weakened significantly during the quarter. AMD shares fell 13.9%, and rivals including Nvidia Corp. NVDA and Intel Corp. INTC also closed lower.
U.S. cannabis stocks were choppy Friday, with the AdvisorShares Pure US Cannabis ETF MSOS, -2.80%
ending lower, following steep gains earlier in the week after President Joe Biden said the U.S. would consider de-scheduling cannabis from its current position as a Schedule 1 narcotic under federal law.
—Steven Goldstein contributed reporting to this article
Treasury yields rose Friday after the U.S. September payrolls report showed a surprise decline in unemployment as well as strong growth in wages, making a pivot in Fed policy less likely.
What’s happening
The yield on the 2-year Treasury TMUBMUSD02Y, 4.307%
rose 5 basis points to 4.31%
The yield on the 10-year Treasury TMUBMUSD10Y, 3.894%
rose 5 basis points to 3.89%.
The yield on the 30-year Treasury TMUBMUSD30Y, 3.858%
increased 3 basis points to 3.82%.
What’s driving markets
The U.S. created 263,000 nonfarm jobs in September — roughly in line with expectations — with the unemployment rate falling to 3.5% from 3.7%, while the year-over-year growth rate in hourly wages was 5%.
The unemployment decline was a surprise to economists who had anticipated a steady jobless picture.
Federal Reserve Gov. Christopher Waller late on Thursday said he didn’t expect the jobs report to change anyone’s thinking at the central bank. New York Fed President John Williams will have the opportunity to comment on the data when he speaks at 10 a.m. Eastern.
Ahead of the release, strategists at ING said the price action this week suggests the market has moved away from the early Fed policy pivot idea. “We may well have seen the structural top at 4% for the 10 year, or thereabouts, but we also feel we’re liable to see it at least one more time. There is a large fall in market rates to come, but we’re not at that point just yet,” they added.
U.S. stock indexes ended modestly lower on Wednesday, despite briefly turning positive in the final hour of trading, while data showed steady growth in private-sector jobs and in the service sector, indicating more scope for the Federal Reserve to continue to raise interest rates.
How stocks traded?
The Dow Jones Industrial Average DJIA, +0.03%
lost 42.45 points, or 0.1%, to finish at 30,273.87
The S&P 500 SPX, +0.21%
was off 7.65 points, or 0.2%, ending at 3,783.28
The Nasdaq Composite COMP, +18.82%
shed 27.77 points, or 0.2%, to end at 11,148.64
On Tuesday, the Dow jumped 825 points, or 2.8%, while the S&P 500 increased 3.1% and the Nasdaq Composite rallied 3.3%.
What drove markets?
Wall Street stocks finished in the red after three main indexes bounced back from earlier losses in the final hour of trade, following a strong September private employment report in the morning.
Data released Wednesday showed that private-sector payrolls rose by 208,000 in September, indicating steady growth and supporting the view that the Fed has enough scope to keep raising interest rates. Economists surveyed by The Wall Street Journal had expected a rise of 200,000.
The report came two days before the closely watched nonfarm payrolls data issued by the Bureau of Labor Statistics. Investors are eying on it for important guidance on the Fed’s policy stance in the November meeting.
Friday’s employment report is expected to show the economy added 275,000 jobs in September, compared with 315,000 new positions added in August, according to a survey polled by Dow Jones.
“That certainly could move the needle,” said Kristina Hooper, chief global market strategist at Invesco. “Again, it doesn’t mean that it actually is going to change the market, but it could be the catalyst for short term rally if we get a disappointing jobs report.”
“But keep in mind, that’s just the anticipation of a Fed pivot based on data. But that does not ensure a Fed pivot. And so it could be one of those short-term rallies like the one we saw earlier this week,” Hooper said.
In other data Wednesday, an ISM barometer of U.S. business conditions in the service sector dipped to 56.7% in September but still showed steady growth and rising employment in a sign the economy is still expanding.
The U.S. trade deficit in August fell to $67.4 billion, the lowest level since mid 2021, paving the way for a resumption of growth in gross domestic product in the third quarter.
The S&P 500 had just enjoyed its largest two day percentage gain since April 2020 on Monday and Tuesday, and the best start to a quarter since 1938, according to Dow Jones Market data.
The bounce followed three quarters of declines, the worst such run since 2008, during which time the S&P 500 fell 24.8% to a near two-year trough as investors worried that the Federal Reserve’s interest rate hikes to crush inflation would harm the economy.
Brian Mulberry, client portfolio manager at Zacks Investment Management, believes the volatility in the stocks will continue because markets are getting a very “consistent message” from the Fed.
“Given what has happened over the last five trading sessions alone, we would be basically telling our clients to tighten your seatbelt a little bit because it’s definitely going to continue to be a bumpy ride,” Mulberry told MarketWatch in a phone interview on Wednesday. “If we get a ‘Goldilocks’ (jobs) report, that would mean decent economic activity is going on. That’s good for earnings overall in the market, but it’s not growing to a point where interest rates would have to be ratcheted up another 125 basis points by the end of the year.”
One major reason behind the rise early this week was the view that the Fed would pivot away from its aggressive monetary tightening.
Johanna Chua, chief Asia economist at Citi, said that though U.S economic growth remained in better shape than other countries and Fed officials continued to sound hawkish, the market risked being wrongfooted by any signs that interest rates could soon peak.
“Even as the overall fundamental setup has not changed… trimming of bearish risk/bearish rates/bullish USD positions has driven a sharp reversal,” Chua said.
Mary Daly, president of the Federal Reserve Bank of San Francisco said Wednesday that the Federal Reserve needs to keep raising its benchmark interest rate in order to cool inflation that hit a 40-year high earlier this year and has shown little signs of cooling. Atlanta Fed President Raphael Bostic will speak at 4 p.m. Eastern.
CLX22,
rose $1.24, or 1.4%, to settle at $87.76 a barrel on the New York Mercantile Exchange.
The S&P 500’s energy sector SP500.10, -0.07%
rose 2.1% following the news, up 12.6% over the last three trading days. According to Dow Jones Market Data, it was the best three-day percentage gain since November 2020 when it gained 16.1%. Shares of Schlumberger SLB, +0.77%
gained 6.3% at the close, while Exxon Mobil XOM, +1.32%
shares advanced 4%.
Companies in focus
Shares of Helen of Troy Ltd. HELE, -2.75%
finished 3.4% higher Wednesday, after the consumer products company, with brands including OXO, Hydro Flask and Braun, reported fiscal second-quarter earnings that beat expectations but cut its full-year outlook, as rising inflation has prompted consumers to change their spending patterns.
Shares of Monopar Therapeutics Inc. MNPR, +6.36%
gained 1.8% after the company said it completed enrollment in a Phase 2b clinical trial evaluating its experimental therapy aimed at preventing severe oral mucositis in patients undergoing chemoradiotherapy for oropharyngeal cancer.
Shares of Eiger BioPharmaceuticals Inc. EIGR, +0.85%
tumbled 5% after the company said it will not pursue emergency authorization of its experimental treatment for mild and moderate COVID-19 infections.
Shares of Lamb Weston Holdings Inc. LW, +2.45%
ended 4.2% higher Wednesday, after the potato supplier reported fiscal first-quarter profit that beat expectations, higher prices helped offset a volume decline.
