Wall St ends down as two-day rally fizzles on data, Fed message
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[October 06, 2022] By
Herbert Lash, Ankika Biswas and Bansari Mayur Kamdar
(Reuters) -Wall Street stocks closed lower
on Wednesday, unable to sustain a late-day surge, after data showing
strong U.S. labor demand again suggested the Federal Reserve will keep
interest rates higher for longer.
Fed officials have insisted on aggressive rate tightening to battle
inflation, a message the market has feared would lead to a hard landing
and likely recession.
However, investors also sought bargains in a market that appears
oversold. The forward price-to-earnings ratio is at 15.9, close to its
historic mean, down from around 22 before the market's big slide this
year.
"By battling back, to me that is a favorable indicator that this rally
could have legs," said Sam Stovall, chief investment strategist at CFRA
Research in New York.
"It too confirms that investors believe, traders believe, that there's
still more to go in this rally," he said.
U.S. private employers stepped up hiring in September, the ADP National
Employment report on Wednesday showed, suggesting rising rates and
tighter financial conditions have yet to curb labor demand as the Fed
battles high inflation.
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The Institute for Supply Management's services industry employment gauge
shot up in another sign labor remains strong as the overall industry
slowed modestly in September.
The Fed is expected to deliver a fourth straight 75-basis-point rate
hike when policymakers meet Nov. 1-2, the pricing of fed fund futures
shows, according to CME's FedWatch tool.
San Francisco Fed President Mary Daly told Bloomberg TV in an interview
that inflation is problematic and that the U.S. central bank would stay
the course.
"The path is clear: we are going to raise rates to restrictive
territory, then hold them there for a while," she said. "We are
committed to bringing inflation down, staying course until we are well
and truly done."
The benchmark S&P 500 index rose 5.7% Monday and Tuesday as Treasury
yields slid sharply on softer U.S. economic data, the UK's turnaround on
proposed tax cuts that had roiled markets and Australia's
smaller-than-expected rate hike.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., September 6,
2022. REUTERS/Brendan McDermid
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Treasury yields shot up again on Wednesday after the softer economic
data failed to bolster budding hopes the Fed might pivot to a less
hawkish policy stance.
Eight of the 11 major S&P 500 sectors fell, led by a 2.25% decline
in utilities and 1.9% drop in real estate.
The energy sector led the market higher, up 2.06%, after the
Organization of the Petroleum Exporting Countries and allies agreed
to cut oil production the deepest since the COVID-19 pandemic began,
curbing supply in an already tight market.
The Dow Jones Industrial Average fell 42.45 points, or 0.14%, to
30,273.87, the S&P 500 lost 7.65 points, or 0.20%, to 3,783.28 and
the Nasdaq Composite dropped 27.77 points, or 0.25%, to 11,148.64.
Volume on U.S. exchanges was 10.43 billion shares, compared with the
11.64 billion average for the full session over the past 20 trading
days.
Twitter Inc lost momentum in line with its peers, a day after
surging 22% on billionaire Elon Musk's decision to proceed with his
original $44-billion bid to take the social media company private.
Twitter fell 1.35% and Tesla Inc, the electric-car maker headed by
Musk, also slid 3.46.
Declining issues outnumbered advancers on the NYSE by a 2.08-to-1
ratio; on Nasdaq, a 1.69-to-1 ratio favored decliners.
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The S&P 500 posted two new 52-week highs and nine new lows; the
Nasdaq Composite recorded 49 new highs and 128 new lows.
(Reporting by Ankika Biswas and Bansari Mayur Kamdar in Bengaluru;
Editing by Arun Koyyur and Richard Chang)
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