Wall St ends down; jobs data feeds fears of more Fed tightening © 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 closed more than 1% lower on Thursday as fresh evidence of a tight labor market ate away at any hopes investors had 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.

According to preliminary data, the S&P 500 lost 44.74 points, or 1.16%, to end at 3,808.23 points, while the Nasdaq Composite lost 153.53 points, or 1.47%, to 10,305.23. The Dow Jones Industrial Average fell 339.18 points, or 1.02%, to 32,930.59.

The indexes had pared losses earlier in the afternoon after St. Louis Federal Reserve leader James Bullard said 2023 could finally bring some welcome relief on the inflation front.

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.

In the previous session, Wall Street’s main indexes erased some of their gains after minutes from the Fed’s December meeting showed the central bank was laser-focused on fighting inflation even as officials agreed to slow the pace of rate hikes to limit risks to economic growth.

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:) Inc sank after December sales of its China-made electric vehicles fell to a five-month low, while Amazon.com Inc (NASDAQ:) also lost ground after it announced increased layoff plans.

Walgreens Boots Alliance (NASDAQ:) Inc fell sharply after the drugstore chain posted a quarterly loss on an opioid litigation charge.

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


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