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Wall St drops more than 1% with jobs data feeding fears of more Fed tightening

Published 01/05/2023, 06:39 AM
Updated 01/05/2023, 07:06 PM
© Reuters. A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 14, 2022. REUTERS/Andrew Kelly

By Sinéad Carew and Amruta Khandekar

(Reuters) - Wall Street's main indexes lost more than 1% on Thursday, with Nasdaq leading the declines, as evidence of a tight labor market eroded hopes that the Federal Reserve could pause its rating hiking cycle anytime soon as it keeps focused on inflation.

Thursday's ADP National Employment report showed a higher-than-expected rise in private employment in December. Another report showed weekly jobless claims fell last week.

On Wednesday, another data set showed a moderate fall in U.S. job openings. While a strong labor market would usually be welcomed as a sign of economic strength, investors currently see it as a reason for the Fed to keep interest rates high.

"It's very clear that good news on the labor market means bad news for the stock market. Data is showing that the labor market is very resilient," said Anthony Saglimbene, chief market strategist at Ameriprise in Tory Michigan.

"As long as the labor market is resilient, the Federal Reserve has to continue to tighten financial conditions to bring inflation down," said that strategist who expects investors to be keenly focused on wage inflation in Friday's jobs report.

The Dow Jones Industrial Average fell 339.69 points, or 1.02%, to 32,930.08, the S&P 500 lost 44.87 points, or 1.16%, to 3,808.1 and the Nasdaq Composite dropped 153.52 points, or 1.47%, to 10,305.24.

The indexes lost steam late in the day, ending close to their session lows. They had pared losses in the early afternoon when St. Louis Federal Reserve leader James Bullard said 2023 could finally bring some welcome relief on the inflation front.

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While Saglimbene noted that Bullard's comments were not surprising, his suggestion that rate hikes were starting to show some signs of dampening inflation, provided some reassurance.

Among the S&P's 11 major sectors, real estate - which was the biggest percentage gainer on Wednesday - lead Thursday's sector losses with a 2.9% drop, with utilities came next, falling 2.2%.

The sole gainer was energy, which closed up 1.99% after crude oil futures settled higher.

On Wednesday, Wall Street's main indexes had erased some of their gains after minutes from the Fed's December meeting showed officials were laser-focused on fighting inflation even as they agreed to slow the hiking pace to limit economic risks.

Earlier Thursday both Kansas City Fed leader Esther George and Atlanta President Raphael Bostic stressed that the central bank's priority was to curb inflation through policy tightening.

Traders see rates peaking at slightly above 5% in June.

The more comprehensive non farm payrolls report due on Friday, will be looked to for further clues on labor demand and the rate hike trajectory.

Among individual stocks, Tesla (NASDAQ:TSLA) Inc ended down 2.9% after December sales of its China-made electric vehicles fell to a five-month low, while Amazon.com Inc (NASDAQ:AMZN) finished down 2.4% after it announced increased layoff plans.

Walgreens Boots Alliance (NASDAQ:WBA) Inc finished down 6% at $35.19 after the drugstore chain posted a quarterly loss on an opioid litigation charge.

Shares in Bed Bath & Beyond Inc (NASDAQ:BBBY) plunged 29.9% to $1.69 after the home goods retailer said it was exploring options, including bankruptcy.

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Declining issues outnumbered advancing ones on the NYSE by a 1.58-to-1 ratio; on Nasdaq, a 1.44-to-1 ratio favored decliners.

The S&P 500 posted 8 new 52-week highs and 7 new lows; the Nasdaq Composite recorded 68 new highs and 66 new lows.

On U.S. exchanges was 10.21 billion shares changed hands compared with the 10.79 billion moving average for the last 20 trading days.

Latest comments

"While a strong labor market would usually be welcomed as a sign of economic strength, investors currently see it as a reason for the Fed to keep interest rates high" What a load of garbage - a strong labour market should be welcomed as a sign that the US economy is starting to recover. So if there was a weak labor market then investors would see a reason to lower interest rates?
way too much pessimism. energy prices are down. soft landing this year. 2024 looking up! this is the time to buy.
It was time to buy 3 months ago
https://www.investing.com/news/stock-market-news/with-big-bets-on-musk-these-funds-may-have-a-tesla-problem-in-23-2973365
https://www.investing.com/news/stock-market-news/with-big-bets-on-musk-these-funds-may-have-a-tesla-problem-in-23-2973365?obOrigUrl=true
🡆  investing.com 🡆
You.know maybe
How come these reporters only report the data is out of expectation??? Isn’t it they should report someone cannot expect things correctly instead??? The data does not causing the market, those expectations are the causes for the market movements
That's a really good point. An honest headline would say: "Analysts' predictions wrong again."
I would like to say the 2008 fall was 50 to 60 percent. But that was brought about with a bunch of unknowns, WS salesmen and banks having to be bailed out by the government. Of course a global pandemic brings a lot of unknowns to the table as well.
A quarter point interest rate increase in Feb 2023 is the only rate "hike" left on the table. This is fear mongering
Nearly 200 points in losses miraculously vanish from the system, as we enter day 3 of the criminal, flagrantly predictable, FRAUDLENT "late trade" run-up.  Guess we'll once again see the most prolific headline in internet news history at the close, "stocks recover losses in late trade."  BIGGEST INVESTMENT JOKE IN THE WORLD.
what a #$#show, good employment numbers mean hawkish fed??  liberal government at its finest.... everything is completely upside down and there will be an over reaction when china is just starting to open.  guess the only good news is that everytime one of these meatheads opens their mouth WTI falls and likely inflation as well
never heard of economy overhearing? full employment is rather false impression of a good economy. anyway what fed is saying is that the wish they could do more to get rid of tons of green liquid they put into system, but couldnt do anything than wait till inflation eata it. they wont risk recession even if they say so.. inflation in control would mean double digit rate.
  50% "employment is" even MORE "false impression of a good economy"
Are you blaming "liberal government" for "good employment numbers"?
I guess after tomorrow's numbers we will go back to the high end of the range. I think I will take a break and wait for alerts to start dinging.
Another miracle intraday "recovery" commences, as the FRAUD and CRIMINAL MANIPULATION roll into 2023 uninhibited.  BIGGEST INVESTMENT JOKE IN THE WORLD.
It should be investigated whether there is a conspiracy to keep the market at lows and not letting it recover for a substantially long period, so that there is a chain affect in emerging markets and thereby entry in various emerging markets is taken at low rates.
Dow should be down 1000 pts today.
hello
There it is! The after lunch manipulation! Count on a pet hour push, too. Markets will finish in the red, but barely considering all the negative economic data and news.
power hour
Bullard just spoke
It should be investigated whether there is a conspiracy to keep the market at lows and not letting it recover for a substantially long period, so that there is a chain affect in emerging markets and thereby entry in various emerging markets is taken at low rates.
For me, Joe Biden is the best president ever. A few months ago I cashed out all stocks and now I'm waiting for the bottom to buyback. As soon as he was elected I knew his policies would crater our economy and cause the stock market to plummet. This is a once in a lifetime opportunity and I'm in a position to take full advantage of it. Thanks again Mr. President.
yeah vulcar even said it himself labour market is pretty hard to get it down.
Thanks Biden now my 401k is back to where it was 4 years ago. Great job.
AFTER contributions, so that's not saying much
I would like to say the 2008 fall was 50 to 60 percent. But that was brought about with a bunch of unknowns, WS salesmen and banks having to be bailed out by the government. Of course a global pandemic brings a lot of unknowns to the table as well.
us stock market became a joke now days🤣🤣🤣🤣
What a joke! Market falls again and again for the same reason that everyone knows.
The markets are still way too high. Over- priced. $SPY should be 300-325
more bull manure manipulation. all constant repetition.
The fed already says rates will continue to raise. The writers of this news seem to be the only ones that dont understand that.
I dont know what peoole expect. Interest rates being so low and for so long was the anomaly. 5% interest rate is pretty normal.
First Last.. like THAT is news? Fed has been dating that for MONTHS
  I understand that, and so do the writers.  Jim incorrectly said, "The writers of this news seem to be the only ones that dont understand that."
Aviation is lockdown to the floor, a world trade attack in perspective ?!
What lock down in aviation?
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