Stocks fall after strong labor market data

U.S. stocks dipped on Thursday morning after economic data showed private payrolls rose more than expected last month and weekly jobless claims fell to a three-month low, pointing to continued labor market pressures despite higher interest rates.

S&P 500 (^GSPC) fell 0.7%, while the Dow Jones Industrial Average (^DJI) lost 250 points, or 0.8%. The tech-heavy Nasdaq Composite (^IXIC) fell by 0.9%.

ADP National Employment The report shows that employment in the private sector has increased with 235,000 jobs in December. Economists polled by Bloomberg had called for an increase of 150,000.

Elsewhere in economic data, jobless claims also fell to 204,000, the lowest since September, in the week ended Dec. 31, from a downwardly revised reading of 223,000 the previous week. The Ministry of Labor said Thursday.

The reports were the latest to show strong demand for workers, even as the Federal Reserve pressed ahead with aggressive monetary tightening to tame inflation. ADP data and weekly jobless claims follow separately measure Wednesday that job openings fell less than expected last month and remained high. The Labor Department’s monthly nonfarm payrolls survey, due out Friday morning, remains the most important read for Fed officials and investors trying to predict the next policy move.

“While we will get a better overall picture of the labor market tomorrow, private payrolls beating expectations and jobless claims coming in below are indications that the labor market remains resilient,” said the head of the global Morgan Stanley Investment Office Model Portfolio Construction Mike Lowengart in Note. “These come on the heels of major companies announcing significant job cuts, so there’s no doubt that market pressures are weighing on companies, but it remains to be seen when hiring will slow noticeably.”

Amazon (AMZN) Chief Executive Andy Jassy said in a note late Wednesday that the company’s planned job cuts will now affect at least 18,000 employees, significantly more than previously indicated. Jassy’s note came next The Wall Street Journal reports the news. Shares were lower in early trading on Thursday.

The figure marks the biggest workforce reduction by a technology company in recent months as a growing number of names in the sector lay off workers to cut costs against a backdrop of more challenging market conditions. Amazon lost an estimated $834 billion in market value in 2022.

Bed Bath & Beyond (BBBY) said in a published statement This is Thursday facing bankruptcy as it struggles with ongoing financial struggles. Shares down more than 22%

Shares of crypto-focused Silvergate Capital (And) fell 38% at the open after that The Wall Street Journal reported Thursday the bank was forced to sell assets with a significant loss to cover $8.1 billion in withdrawals following the FTX bankruptcy. The fall comes after shares rose 27% on Wednesday.

In other moves in crypto stocks, Coinbase (COIN) shares fell 10% after Cowen downgraded it to Market Perform from Outperform, citing a “fairly consistent decline” in trading volumes and the risk of possible regulatory action following the FTX collapse.

“There is little visibility for retail trade volumes to stabilize in 2023 following the further deterioration in December,” the firm said. “Potential SEC enforcement action raised after FTX with regulatory certainty unlikely until 2024.”

Shares of T-Mobile (TMUS) rose 1.8% after the mobile service provider reported fourth-quarter subscriber growth that slightly beat forecasts. The company added 927,000 new phone customers in the period, compared with analysts’ calls for 921,000.

Johnson & Johnson’s (JNJ) consumer health business Kenvue filed on Wednesday to be listed as a separate company, marking the first significant US initial public offering filing of the new year.

Elsewhere, oil prices resumed their slide after falling nearly 10% in the past two days. West Texas Intermediate (WTI) crude futures, the US benchmark, fell to $72 a barrel.

Screens on the trading floor of the New York Stock Exchange (NYSE) show Federal Reserve Chairman Jerome Powell during a press conference December 14, 2022. REUTERS/Andrew Kelly

Scheduled speeches by Federal Reserve Chairs Raphael Bostick and James Bullard will also be closely watched on Thursday.

Stocks closed higher on Wednesday after a volatile session influenced by a reading of the minutes from the Federal Reserve’s December meeting and economic data that showed higher than expected jobs and a a decline in manufacturing activity for the second consecutive month.

The minutes from the Fed on Wednesday were released employees who oppose “unwarranted” relief on financial conditions, although they welcomed the cooling of inflation and the need to maintain a “restrictive policy stance” until the data became more promising.

“The minutes from the December meeting show that FOMC members remain focused on current inflation and inflation risks, with the fear of overdoing monetary policy receiving very little attention,” Pantheon Macroeconomics chief economist Ian Shepherdson said in a note.

“Don’t expect them to soften their inflation line until it’s clear that a major shift in the data is taking place,” he added.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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