Wall Street’s drops more than 1% with jobs data feeding fears of more Fed tightening

5 January (Reuters) The Nasdaq led the falls on Wall Street’s key indexes on Thursday as signs of a tight labour market dashed optimism that the Federal Reserve will soon suspend its cycle of rating hikes in favour of focusing on inflation.

American private payrolls increase faster than anticipated

Initial unemployment claims dropped each week.

Tesla declines as sales of vehicles built in China decline

Downward indexes: Dow 1.02%, S&P 1.16%, and Nasdaq 1.47%

In December, private employment increased more than anticipated, according to Thursday’s ADP National Employment report. Another report showed weekly jobless claims fell last week.

On Wednesday, new job vacancies in the United States moderately decreased. Although a robust job market is typically regarded as a sign of economic health, investors today view it as a justification for the Fed to maintain high-interest rates.

“It is obvious that positive labour market news will have a negative impact on the stock market. The labour market is highly resilient, according to data “said Anthony Saglimbeni, the Ameriprise chief market strategist in Tory, Michigan.

The expert believes that markets will pay close attention to wage inflation in Friday’s jobs data and that the Federal Reserve must continue to tighten financial conditions as long as the labour market is resilient in order to reduce inflation.

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

Late in the day, the indices lost momentum and finished close to their session lows. When James Bullard, president of the St. Louis Federal Reserve, predicted that 2023 might finally usher in some much-needed relief on the inflation front, they had already begun to pair their losses.

Bullard’s remarks, according to Saglimbene, were unsurprising, but his assertion that rate increases were beginning to have an impact on inflation gave some comfort.

Real estate (.SPLRCR), the largest percentage gainer on Wednesday among the S&P’s 11 major sectors, led sector losses on Thursday with a decline of 2.9%, followed by utilities (.SPLRCU) with a decline of 2.2%.

Energy (.SPNY), the lone gainer, closed up 1.99% as crude oil futures settled higher.

The major Wall Street indexes had given up some of their gains on Wednesday when it became clear from the minutes of the Fed’s December meeting that policymakers were committed to combating inflation even as they decided to cut the rate of hikes to reduce risks to the economy.

Both Atlanta President Raphael Bostic and Kansas City Fed President Esther George emphasised earlier on Thursday that the goal of the central bank was to reduce inflation through tighter monetary policy.

Traders predict that rates will peak in June at a little over 5%

Further information on labour demand and the pace of rate hikes will be gleaned from the Friday due, more comprehensive non-farm payrolls report.

In terms of specific equities, Tesla Inc (TSLA.O) closed the day down 2.9% after reporting a five-month low in December electric vehicle sales made in China, and Amazon.com Inc (AMZN.O) completed the day down 2.4% after announcing additional layoff plans.

The drugstore operator Walgreens Boots Alliance Inc (WBA.O) reported a quarterly loss on an opioid litigation charge, and the stock ended the day down 6% at $35.19.

Following the home goods retailer’s announcement that it was considering all alternatives, including bankruptcy, shares of Bed Bath & Beyond Inc (BBBY.O) fell 29.9% to $1.69.

On the NYSE, declining issues outnumbered rising ones by a ratio of 1.58 to 1; on the Nasdaq, the ratio was 1.44 to 1.

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

10.21 billion shares were traded on U.S. exchanges, compared to the 10.79 billion moving average for the previous 20 trading days.

Reporting by Sinéad Carew in New York; editing by Arun Koyyur, Shounak Dasgupta, and David Gregorio; reporting by Shubham Batra, Bansari Mayur Kamdar, and Ankika Biswas in Bengaluru.

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