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Wall Street closed sharply lower on Thursday, erasing the previous session’s gains. Private payroll numbers and jobless claims showed a robust and resilient labor market, thereby stoking fears that the Fed would get more hawkish with its policy moves. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1% or 339.69 points to close at 32,930.08. Twenty-three components of the 30-stock index ended in negative territory, while seven ended in positive.
The S&P 500 lost 1.2% or 44.87 points to close at 3,808.10. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Real Estate Select Sector SPDR (XLRE), the Utilities Select Sector SPDR (XLU) and the Technology Select Sector SPDR (XLK) dropped 2.9%, 2.2% and 1.9%, respectively, while the Energy Select Sector SPDR (XLE) rose 1.8%.
The tech-heavy Nasdaq decreased 1.5% or 153.52 points to finish at 10,305.24.
The fear-gauge CBOE Volatility Index (VIX) increased 2% to 22.46. A total of 10.2 billion shares were traded on Thursday, lower than the last 20-session average of 10.8 billion. Decliners outnumbered advancers on the NYSE by a 1.58-to-1 ratio. On the Nasdaq, a 1.44-to-1 ratio favored declining issues.
Reports Show a Robust Labor Market
Wall Street has been on tenterhooks in recent sessions, trying to gauge how the Federal Reserve would interpret any sectoral strength seen in economic data. The central bank has repeatedly said that it is looking for clear signs of inflation going down before it makes any strong reversals to its policy tightening measures. On Thursday, investor mood was downbeat on numbers coming in, which reflected a strong labor market, presuming that it would deter the Fed from going slow.
Payroll processing firm ADP reported that companies added far more positions than expected in December. Private payrolls rose by 235,000 for the month, well ahead of the consensus estimate and the 127,000 initially reported for November. The goods-producing sector increased by 22,000, while service providers added 213,000. Small- and medium-sized businesses added 386,000 workers. Per the report, business segments that hired aggressively in the first half of 2022, slowed hiring and, in some cases, cut jobs in December. But the numbers still showed a resilient labor market and became a chief cause of concern for investors hoping to see it contract for the Fed to provide some relief.
The Labor Department said on Thursday that initial jobless claims fell to 204,000, decreasing 19,000 for the week ending Dec 31 from the previous week's revised level. The previous week's level was revised down by 2,000 from 225,000 to 223,000. The four-week moving average decreased to 213,750, marking a fall of 6,750 from the previous week’s revised average. The previous week's average was revised down by 500 from 221,000 to 220,500.
Continuing claims came in at 1,694,000 for the week ending Dec 24, decreasing 24,000 from the previous week’s revised level. The previous week's numbers were revised up by 8,000 from 1,710,000 to 1,718,000. The 4-week moving average came in at 1,687,500, an increase of 6,000 from the previous week's revised average. The previous week's average was revised up by 2,000 from 1,679,500 to 1,681,500.
The continued strength seen in the jobs market keeps alive the risk that the Fed, which is currently on its fastest rate-hiking cycle since the 1980s, could raise its target interest rate above the 5.1% peak it projected last month.
There was some optimism coming in from the statement made by St. Louis Federal Reserve leader James Bullard, even as the dreary session continued. The FOMC “has taken aggressive action during 2022, with ongoing increases in the policy rate planned for 2023, and this has returned inflation expectations to a level consistent with the Fed’s 2% inflation target,” Bullard said before a meeting held by the CFA Society St. Louis. “During 2023, actual inflation will likely follow inflation expectations to a lower level as the real economy normalizes,” he added.
Bullard went on to say that he was hopeful that a soft landing would be achieved by the Fed because the labor market continues to be resilient, and not in spite of it. Although his comments and the realities of Thursday’s session were directly in conflict with each other, positive signals coming in from an important Fed official were welcomed by the market.
Economic Data
According to a government report, crude inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week.
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Stock Market News for Jan 6, 2023
Wall Street closed sharply lower on Thursday, erasing the previous session’s gains. Private payroll numbers and jobless claims showed a robust and resilient labor market, thereby stoking fears that the Fed would get more hawkish with its policy moves. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1% or 339.69 points to close at 32,930.08. Twenty-three components of the 30-stock index ended in negative territory, while seven ended in positive.
The S&P 500 lost 1.2% or 44.87 points to close at 3,808.10. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Real Estate Select Sector SPDR (XLRE), the Utilities Select Sector SPDR (XLU) and the Technology Select Sector SPDR (XLK) dropped 2.9%, 2.2% and 1.9%, respectively, while the Energy Select Sector SPDR (XLE) rose 1.8%.
The tech-heavy Nasdaq decreased 1.5% or 153.52 points to finish at 10,305.24.
The fear-gauge CBOE Volatility Index (VIX) increased 2% to 22.46. A total of 10.2 billion shares were traded on Thursday, lower than the last 20-session average of 10.8 billion. Decliners outnumbered advancers on the NYSE by a 1.58-to-1 ratio. On the Nasdaq, a 1.44-to-1 ratio favored declining issues.
Reports Show a Robust Labor Market
Wall Street has been on tenterhooks in recent sessions, trying to gauge how the Federal Reserve would interpret any sectoral strength seen in economic data. The central bank has repeatedly said that it is looking for clear signs of inflation going down before it makes any strong reversals to its policy tightening measures. On Thursday, investor mood was downbeat on numbers coming in, which reflected a strong labor market, presuming that it would deter the Fed from going slow.
Payroll processing firm ADP reported that companies added far more positions than expected in December. Private payrolls rose by 235,000 for the month, well ahead of the consensus estimate and the 127,000 initially reported for November. The goods-producing sector increased by 22,000, while service providers added 213,000. Small- and medium-sized businesses added 386,000 workers. Per the report, business segments that hired aggressively in the first half of 2022, slowed hiring and, in some cases, cut jobs in December. But the numbers still showed a resilient labor market and became a chief cause of concern for investors hoping to see it contract for the Fed to provide some relief.
The Labor Department said on Thursday that initial jobless claims fell to 204,000, decreasing 19,000 for the week ending Dec 31 from the previous week's revised level. The previous week's level was revised down by 2,000 from 225,000 to 223,000. The four-week moving average decreased to 213,750, marking a fall of 6,750 from the previous week’s revised average. The previous week's average was revised down by 500 from 221,000 to 220,500.
Continuing claims came in at 1,694,000 for the week ending Dec 24, decreasing 24,000 from the previous week’s revised level. The previous week's numbers were revised up by 8,000 from 1,710,000 to 1,718,000. The 4-week moving average came in at 1,687,500, an increase of 6,000 from the previous week's revised average. The previous week's average was revised up by 2,000 from 1,679,500 to 1,681,500.
The continued strength seen in the jobs market keeps alive the risk that the Fed, which is currently on its fastest rate-hiking cycle since the 1980s, could raise its target interest rate above the 5.1% peak it projected last month.
Stocks, thus, fell on the reports. Consequently, shares of TransAlta Corporation (TAC - Free Report) and Zscaler, Inc. (ZS - Free Report) fell 3.1% and 6.5%, respectively. TransAlta carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Important Fed Official Shows Optimism
There was some optimism coming in from the statement made by St. Louis Federal Reserve leader James Bullard, even as the dreary session continued. The FOMC “has taken aggressive action during 2022, with ongoing increases in the policy rate planned for 2023, and this has returned inflation expectations to a level consistent with the Fed’s 2% inflation target,” Bullard said before a meeting held by the CFA Society St. Louis. “During 2023, actual inflation will likely follow inflation expectations to a lower level as the real economy normalizes,” he added.
Bullard went on to say that he was hopeful that a soft landing would be achieved by the Fed because the labor market continues to be resilient, and not in spite of it. Although his comments and the realities of Thursday’s session were directly in conflict with each other, positive signals coming in from an important Fed official were welcomed by the market.
Economic Data
According to a government report, crude inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week.