Wall St slips as labor market data fuels Fed worry
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[January 20, 2023] By
Chuck Mikolajczak
NEW YORK (Reuters) - U.S. stock indexes closed lower on Thursday after
data pointing to a tight labor market renewed concerns the Federal
Reserve will continue its aggressive path of rate hikes that could lead
the economy into a recession.
A report from the Labor Department showed weekly jobless claims were
lower than expected, indicating the labor market remains solid despite
the Fed's efforts to stifle demand for workers.
Expectations the central bank would further dial down the size of its
interest rate increases at its policy announcement next month were
unchanged by the report.
Investors have been looking for signs of weakness in the labor market as
a key ingredient needed for the Fed to begin to slow its policy
tightening measures.
Other data showed manufacturing activity in the mid-Atlantic region was
subdued again in January, while data from the commerce department
confirmed the recession in the housing market persisted.
"What we are seeing is the market carving out a bottom in the
uncertainty so the news is having less of an effect and what we are
seeing today is really just a continuation of that," said Brad McMillan,
chief investment officer for Commonwealth Financial Network, an
independent broker-dealer in Waltham, Massachusetts.
"The fact we are not seeing more of a reaction says a lot of the bad
news is out there."
The Dow Jones Industrial Average fell 252.4 points, or 0.76%, to
33,044.56, the S&P 500 lost 30.01 points, or 0.76%, to 3,898.85 and the
Nasdaq Composite dropped 104.74 points, or 0.96%, to 10,852.27.
Recent comments from Fed officials continue to highlight the disconnect
between the central bank's view of its terminal rate and market
expectations.
Boston Fed President Susan Collins echoed comments from other
policymakers to support the case for interest rates to rise beyond 5%.
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Traders work at the post where Carvana
Co. is traded on the floor of the New York Stock Exchange (NYSE) in
New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid
But stocks moved off their session lows after Fed vice chair Lael
Brainard said the Fed is still "probing" for the level of interest
rates that will be necessary to control inflation.
Markets, however, see the terminal rate at 4.89% by June and have
largely priced in a 25-basis point rate hike from the U.S. central
bank in February, with rate cuts in the back half of the year..
Both the S&P 500 and the Dow fell for a third straight session,
their longest streak of declines in a month.
On the earnings front, Procter & Gamble Co declined 2.11% after
warning of commodity costs pressuring profits, despite raising its
full-year sales forecast.
Analysts now expect year-over-year earnings from S&P 500 companies
to decline 2.8% for the fourth quarter, according to Refinitiv data,
compared with a 1.6% decline in the beginning of the year.
Netflix Inc closed 3.23% lower ahead of its results scheduled for
release after the closing bell on Thursday. But the stock rebounded
to gain 3.33% after posting subscriber gains for the quarter and the
departure of co-founder Reed Hastings as chief executive to an
executive chairman role.
Declining issues outnumbered advancing ones on the NYSE by a
1.49-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favored decliners.
The S&P 500 posted 1 new 52-week highs and 3 new lows; the Nasdaq
Composite recorded 46 new highs and 33 new lows.
(Reporting by Chuck Mikolajczak, editing by Deepa Babington)
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