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S&P 500 Slips as Tech Remains Pain Trade Ahead of Jobs Data

Published 01/06/2022, 03:11 PM
Updated 01/06/2022, 04:11 PM
© Reuters.

By Yasin Ebrahim – The S&P 500 closed slightly lower Thursday, as a climb in financials and energy was offset by slip in tech ahead of Friday's monthly jobs report.

S&P 500 fell 0.1%, the Dow Jones Industrial Average slipped 0.47%, or 170 points, the Nasdaq fell 0.1%.

Tech's intraday recovery was short-lived as the sector ended the day lower, though Meta, formerly known as Facebook (NASDAQ:FB), was the notable out performer ending the day up more than 2%.

Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) ended the day in the red.

The pressure in tech comes in the wake of concerns that growth stocks are set for a challenging period as the Federal Reserve - in its December minutes released Wednesday – signaled that it could be prepared to tighten monetary policy faster than expected to curb inflation pressures.

Some, however, were quick to remind investors that Fed member discussions about tightening were in line with the communication at the December meeting.

“It is important to keep in mind that these minutes are entirely consistent with the Fed communication at the FOMC meeting, the updated dots, and the communication in the interim,” Jefferies said in a note. “There isn't really any new information here.”

Cyclical concerns of the market continued to enjoy gains, with energy and financial leading to the upside.

Energy was pushed higher by rising U.S. oil prices, which briefly topped $80 a barrel, but some see headwinds on the horizon as the omicron variant threatens demand at time when supply is set to increase in the first quarter, “partly due to the release of strategic reserves,” Commerzbank said.

Financials, mostly bank stocks, were in rally mode, supported by higher Treasury yields as the 10-year closing in on its 52-week high amid expectations for sooner rather later tightening from the Federal Reserve.

Signature Bank (NASDAQ:SBNY), SVB Financial (NASDAQ:SIVB), and People’s United Financial (NASDAQ:PBCT) were among the biggest gainers.

Banks are set to garner added attention in the coming weeks as JPMorgan and Citigroup kick off the quarterly earnings season in earnest on Jan. 14.

On the economic front, data showed that services activity weakened by more than expected, while weekly jobless claims unexpectedly rose to 207,000 for the week ended Jan. 1.

Still, market participants remain confident on the recovery, particularly in the labor market, where monthly job gains in December are expected to have bounced back following softer November data.

Economists forecast the U.S. economy created 400,000 jobs in December, underpinned by a pick-up in the number of people entering the labor market.

“In December, we think the participation rate will tick up from 61.8% to 61.9%. Together with our forecast for employment, this would leave the unemployment rate unchanged at 4.2% in December,” Morgan Stanley said ahead of the jobs report.

In other news, Bed Bath & Beyond (NASDAQ:BBBY) rallied 8% despite reporting fiscal third-quarter results that missed on both the top and bottom lines amid ongoing supply chain bottlenecks.

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