U.S. stock benchmarks were holding solidly lower Wednesday as data from ADP showed a jump in private payrolls in September, which could hasten the Federal Reserve’s plans to taper bond purchases and normalize rates.
Investors so far have been fixated on bond yields, with the 10-year Treasury note briefly climbing to highs not seen since June, before reversing course, amid fears about inflation. Investors also were watching the federal debt-ceiling debate in Washington, and the likelihood of tighter monetary policy from the Federal Reserve.
- The Dow Jones Industrial Average fell 327 points, or 1%, to 34,987.
- The S&P 500 declined 26 points, or 0.6%, to 4,320.
- The Nasdaq Composite Index traded 35 points, or 0.2%, lower to reach 14,398.
On Tuesday, the Dow Jones Industrial Average rose 312 points, or 0.92%, to 34315, the S&P 500 increased 45 points, or 1.05%, to 4346, and the Nasdaq Composite gained 178 points, or 1.25%, to 14434.
What’s driving the market?
Gains from Tuesday’s turnaround were eroding as investors wrestled with jobs data and contended with a litany of problems that could further deflate bullishness on Wall Street.
A report from Automatic Data Processing Inc. showed that 568,000 private-sector jobs were created in September, outpacing estimates from The Wall Street Journal for 425,000. However, a reading for August was reduced to 340,000 from 374,000.
Still, the labor-market report, coming ahead of the more closely followed nonfarm payrolls report due Friday from the Labor Department, may be sufficient to meet the Federal Reserve’s criteria for “substantial further progress” as the central bank looks ready to taper its monthly purchases of Treasurys and mortgage-backed securities as the economy recovers from the COVID-19 pandemic.
Mike Loewengart, managing director at E-Trade Financial, told MarketWatch via email that “given the backdrop of uncertainty we’re facing on a number of fronts, investors could be reading into the potential effect that a positive jobs read will have on Fed policy, as opposed to what it means for where we stand in terms of economic recovery.”
“Bottom line is there are a number of factors likely contributing to market moves in this relatively volatile environment. So the ADP read is really just one piece of the puzzle, and historically hasn’t always stacked up as a proxy for the full jobs report we’ll get later in the week,” Loewengart said.
Economists expect the economy added a net 500,000 jobs in September, up from the disappointing 235,000 jobs added in August, according to a Wall Street Journal poll. The unemployment rate is expected to tick down to 5.1% from 5.2%.
Meanwhile, rising bond yields may derail chances of any follow-up to Tuesday’s gains in stocks. The 10-year Treasury note BX:TMUBMUSD10Y briefly rose to around 1.57% before pulling back to 1.51%.
Some investors, meanwhile, were seeking haven in the U.S. dollar, which rose 0.3% on Wednesday, as measured by the ICE U.S. Dollar Index
The combined effect of rising yields and a global energy crunch especially in Europe and Asia is triggering “more negative sentiment,” said Saxo Bank’s chief investment officer, Steen Jakobsen, in a note to clients.
“Yesterday’s session failed to take out the previous day’s high, so if the energy crunch narrative builds today with yields extending their rise, then we could see a renewed selloff,” Saxo Bank’s chief investment officer, Steen Jakobsen, in a note to clients.
Natural-gas futures tapped fresh record prices on Wednesday in the U.K. and Europe, but were seen pulling back substantively on reports of increased supplies from Russia.
Technology stocks looked set to lead any selloff, as rising yields can be a negative for shares of fast-growing companies as they make those future cash flows appear less valuable.
Which companies are in focus?
- Shares of Palantir Technologies Inc. jumped 5% after the data-software company said it won an $823 million Army contract.
- Shares of Camber Energy Inc. CEI tumbled 18% in active trading Wednesday morning, putting them on track to shed more than two-thirds of their value in four days.
- Office Depot has announced its “20 Minute Pickup Promise,” which will make orders placed on the retailer’s website or mobile app available for in-store or curbside pickup in 20 minutes or the customer will receive a discount on their next qualifying purchase.
- Allbirds Inc. has shifted the language on its sustainability framework in the latest amendment to its IPO prospectus.
- Shares of Voyager Therapeutics Inc. VYGR rocketed Wednesday, after closing at a record low in the previous session, as the gene-therapy company announced a license option agreement with Pfizer Inc. PFE that could valued at more than $600 million.
- General Motors Co. GM and General Electric Co. GE said Wednesday that they signed a memorandum of understanding (MOU) to improve supplies of rare earth materials, magnets, copper and electrical steel used in making electric vehicles and renewable energy equipment.
How are other assets trading?
- Oil futures fell, with the U.S. benchmark down 1.7% to $77.59 a barrel. Gold futures dropped 0.1% to around $1,758.50 an ounce.
- In Europe, the Stoxx Europe 600 fell 1.3%, while London’s FTSE 100 dropped 1.5%.
- The Hang Seng Index closed down 0.5% in Hong Kong, while Japan’s Nikkei 225 dropped 1%. Markets in China remain closed for a holiday.