Wall Street fell as labor market data fueled Fed concern

Wall Street fell as labor market data fueled Fed concern

  • Procter & Gamble falls after a warning about commodity cost pressure
  • Netflix drops ahead of quarterly results
  • The Dow Jones fell 0.76%, the Standard & Poor’s 500 fell 0.76% and the Nasdaq 0.96%

NEW YORK (Reuters) – U.S. stock indexes closed lower on Thursday after data showing a tightening labor market revived fears that the Federal Reserve will continue its aggressive path to raise interest rates, potentially tipping the economy into recession.

A report from the Labor Department showed that weekly jobless claims were lower than expected, indicating that the job market remains strong despite the Federal Reserve’s efforts to stifle demand for workers.

Expectations that the central bank will reduce the size of interest rate increases when announcing its policy next month remained unchanged in the report.

Investors have been looking for signs of weakness in the labor market as a key component needed for the Fed to begin slowing policy tightening.

Unemployment claims

Other data showed that manufacturing activity in the Mid-Atlantic region eased again in January, while data from the Commerce Department confirmed continued slack in the housing market.

“What we’re seeing is the market cutting a bottom in the uncertainty, so the impact of the news is less, and what we’re seeing today is just a continuation of that,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. , an independent broker-dealer in Waltham, Massachusetts.

“The fact that we don’t see more backlash suggests that there is a lot of bad news.”

The Dow Jones Industrial Average fell 252.4 points, or 0.76%, to 33044.56, the Standard & Poor’s 500 lost 30.01 points, or 0.76%, to 3898.85 points, and the Nasdaq Composite Index fell 104.74 points, or 0.96%, to 10852.27.

Traders work at the site as Carvana trades on the floor of the New York Stock Exchange (NYSE) in New York City, US, December 7, 2022. REUTERS/Brendan McDiarmid

Recent comments from Federal Reserve officials continue to highlight the disconnect between the central bank’s view of the final interest rate and market expectations.

Boston Fed Chair Susan Collins echoed other policymakers’ comments to support the case for higher interest rates beyond 5%.

But stocks pulled back from session lows after Fed Vice Chair Lyle Brainard said the Fed was still “looking” for the level of interest rates that would be necessary to control inflation.

However, markets see a final interest rate of 4.89% by June, largely priced in by the US central bank’s 25 basis point rate hike in February, with rate cuts coming in the second half of the year. .

The S&P 500 and the Dow both fell for the third straight session, their longest losing streak in a month.

On the earnings front, Procter & Gamble Co (PG.N) fell 2.11% after warning that commodity costs were pressuring earnings, despite an increase in full-year sales forecasts.

Analysts now expect S&P 500 companies’ year-over-year earnings to decline 2.8% for the fourth quarter, according to Refinitiv data, compared to a decline of 1.6% at the start of the year.

Netflix Inc (NFLX.O) closed down 3.23% ahead of its results set for release after Thursday’s closing bell. But the stock rebounded to gain 3.33% after earnings for subscribers for the quarter and the departure of co-founder Reed Hastings as chief executive officer.

Low issues outnumbered high issues on the NYSE by a ratio of 1.49 to 1; On the Nasdaq, the ratio was 1.70 to 1 in favor of declining stocks.

S&P 500 hits a new 52-week high and 3 new lows; The Nasdaq index posted 46 new highs and 33 new lows.

(Reporting by Chuck Mikolajczak), Editing by Deba Babbington

Our Standards: The Thomson Reuters Trust Principles.

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