Stocks fall after strong labor market data

U.S. stocks fell 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, suggesting continued labor market tensions despite higher interest rates.

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

The ADP National Employment report showed that private employment increased by 235,000 jobs in December. Economists polled by Bloomberg called for an increase of 150,000.

Elsewhere in economic data, jobless claims also fell to 204,000, the lowest since the previous week’s downwardly revised reading of 223,000 in the week ended Sept. 31, the Labor Department said Thursday.

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

Mike Loewengart, Head of Model Portfolio Construction at Morgan Stanley’s Global Investment Bureau, said, “While we’ll get a better overall picture of the labor market tomorrow, the better-than-expected personal payrolls report and lower-than-expected jobless claims are signs that the labor market is resilient.” Note. “These come on the heels of major companies announcing major job cuts, so there’s no doubt that market pressures are affecting companies, but it remains to be seen if hiring will clearly slow down.”

Amazon ( AMZN ) CEO Andy Jassy said in a note Wednesday that the company’s planned job cuts will now affect at least 18,000 workers, far more than previously indicated. Jassy’s memo came after the Wall Street Journal broke the news. Shares fell in early trading on Thursday.

The figure marks the biggest job cuts by a tech company in months, as a growing number of names in the sector cut staff to cut costs amid tougher market conditions. Amazon has lost about $834 billion in market value in 2022.

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

Shares of cryptocurrency-focused Silvergate Capital ( SI ) surged 38% on Thursday after The Wall Street Journal reported that the bank was forced to sell assets to pay for an $8.1 billion bailout following the bankruptcy of FTX. The decline followed a 27% gain on Wednesday.

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

“There is a lower outlook for a stabilization in retail trade volumes in 2023 after worsening in December,” the firm said. “Potential SEC enforcement actions are heightened after FTX, and regulatory certainty is unlikely until 2024.”

Shares of T-Mobile ( TMUS ) rose 1.8% after the mobile service provider reported fourth-quarter subscriber growth that slightly beat estimates. The company added 927,000 new phone customers in the period, compared with 921,000 analyst calls.

Johnson & Johnson’s ( JNJ ) consumer health business Kenvue filed to list as a separate company on Wednesday, marking the first notable U.S. initial public offering of the new year.

In other markets, oil prices started to fall again after falling about 10% in the past two days. The US benchmark price of West Texas Intermediate (WTI) crude oil fell to $72/barrel.

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

Also closely watched will be Thursday’s scheduled speeches by Federal Reserve Presidents Raphael Bostic and James Bullard.

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

Fed minutes on Wednesday showed officials opposed to “unwarranted” easing of monetary conditions, even as they welcomed the cooling of inflation and should maintain an “accommodative policy stance” until data is more encouraging.

“The minutes of the December meeting show that FOMC members are focused on current inflation and inflation risks, with little attention given to the fear of monetary policy overload,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“Don’t expect them to soften the inflation line until it’s clear that a major change in the data is underway,” he said.

Alexandra Semenova is a correspondent for Yahoo Finance. Follow him on Twitter @alexandraandnyc

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