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Dow falls 300 points after strong jobs data signals Fed likely to stay in hiking mode
Carmen Reinicke
Alex Harring
Stocks open lower after jobs data showed the labor market is still strongWATCH NOW
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Stocks open lower after jobs data showed the labor market is still strong
Stocks fell Thursday after jobs data showed the labor market is still strong amid the Federal Reserve’s interest rate hikes to tame inflation.

The Dow Jones Industrial Average fell 257 points, or 0.77%. The S&P 500 and Nasdaq Composite slipped 0.71% and 0.83%, respectively. Bond yields ticked higher. Stocks rose from lows of the day in the afternoon when St. Louis Federal Reserve President James Bullard said that 2023 may be a disinflationary year in a speech.

Stocks opened lower after the ADP private payrolls report showed that employers added 235,000 jobs in December, well above economist estimates. Wages also increased more than anticipated, another sign that the labor market remains hot. Later in the morning, weekly jobless claims came in below expectations and showed a drop in continuing claims.

“While we will get a better overall picture of the jobs market tomorrow, private payrolls beating expectations and jobless claims coming in below are indications that the labor market remains resilient,” said Mike Loewengart of Morgan Stanley Global Investment Office.

“These come on the heels of big-name companies announcing sizable job cuts so there is no doubt the market’s pressures are weighing on companies, but it remains to be seen when hiring will slow demonstrably,” he added.

The moves follow a choppy trading session as traders pored over a mixed bag of economic data.

November’s Job Openings and Labor Turnover, or JOLTS, report showed the job market remained strong, bolstering concerns that the Fed could continue raising interest rates as long as there remained a hot market for workers. But the ISM manufacturing index showed the sector was contracting.

On Friday, investors will review the December jobs report for updated data on employment and hourly wages. Since the report could have a big impact on the Fed’s next moves, it has the potential to impact the market. Investors don’t want to see big gains in wage growth, which could signal higher inflation.

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Stocks Turn Lower After Data Points to Strong Labor Market
Crude oil rebounds after slumping at the start of the year

By Will HornerFollow
and Hardika SinghFollow
Updated Jan. 5, 2023 at 12:08 pm ET
The S&P 500 dropped 1.1% around midday. The Dow Jones Industrial Average declined 1.2%, or about 400 points. The Nasdaq Composite was down 1.1%.

U.S. indexes had gained Wednesday, despite the release of Federal Reserve meeting minutes in which officials stressed their resolve in seeking to tame inflation.

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Investors have started the year skittish about whether central banks can bring inflation back under control without inflicting too much damage on the global economy. Both inflation and economic growth have shown signs of slowing, lifting hopes that the Fed and other central banks could soon moderate or end their programs of lifting interest rates. Still, Fed officials, in minutes released Wednesday, cautioned investors that rates would have to remain high for some time.

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“Unless there is a shock from left field, we should see growth continue to be soft, inflation should decline and at some point, central banks are going to stop raising interest rates,” said Charles Diebel, head of fixed income at Mediolanum International Funds. “This year is all about when, not if.”

David Bailin, chief investment officer at Citi Global Wealth, said he expects that unemployment will rise in 2023 and that the Fed will have its first rate cut toward the end of the year.


Investors have started 2023 skittish about whether central banks will be able to tame inflation.Photo: Michael M. Santiago/Getty Images
U.S. weekly jobless claims fell by 19,000 to 204,000 in the final week of 2022. Economists surveyed by The Wall Street Journal had expected 223,000 claims.

Meanwhile, ADP data showed private-sector hiring accelerated in December. Both readouts suggest the labor market remains resilient despite interest-rate increases, and come a day ahead of the keenly watched monthly jobs report. A strong labor market has been a source of concern for Fed officials as they attempt to cool inflation.

“Fed pivot in my mind is going to occur when the data is bad, not when the market feels the Fed has tightened enough,” said Robert Stimpson, chief investment officer at Oak Associates. Mr. Stimpson said that investors should be ready for more bear-market rallies this year.

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Shares of Silvergate Capital fell 45% after The Wall Street Journal reported that the collapse of crypto exchange FTX forced the bank to sell assets at a steep loss to cover about $8.1 billion in withdrawals.

Amazon.com stock fell 1.4% after the Journal reported the company would lay off more than 18,000 employees—a larger total than originally expected and the latest sign that tech firms are concerned about an economic downturn.

Bed Bath & Beyond shares slumped 25% after the company said there is substantial doubt it can stay in business as it struggles to keep shelves stocked and curb declining sales.

A major unknown for markets in 2023: how China’s reopening from Covid-19 lockdowns proceeds. Investors hope Beijing can return its economy to full steam without sparking a dangerous new virus wave. It is unclear, however, whether the reopening would reduce inflation as logistical bottlenecks ease or propel it higher as Chinese consumers spend more.

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“China’s reopening is the most obvious curveball at the moment” for investors, said Mr. Diebel added.

Yields on U.S. Treasury bonds climbed after trending lower in recent days. The yield on the benchmark 10-year Treasury note traded at to 3.733% from 3.709% on Wednesday. Bond yields rise as prices fall.

The dollar rose, with the WSJ Dollar Index, which tracks the greenback against a basket of other currencies, gaining 0.7%.

In commodity markets, oil prices rebounded following sharp declines in the first trading days of 2023. The most actively traded futures contract for Brent crude, the international oil benchmark, added 1.8% to $79.23 a barrel. Brent had shed more than 9% over the course of Tuesday and Wednesday, on concerns about global demand.

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Overseas indexes were mixed. The Stoxx Europe 600 wavered between small gains and losses as investors digested the Fed minutes, which were released after European markets closed Wednesday.

Asian benchmarks mostly rose. The Nikkei 225 gained 0.4%, while the Hang Seng Index in Hong Kong and mainland China’s Shanghai Composite Index rose 1.2% and 1%, respectively.

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LAST CHG %CHG
DJIA 32930.08 -339.69 -1.02
S&P 500 3808.10 -44.87 -1.16
Nasdaq Composite 10305.24 -153.52 -1.47
Japan: Nikkei 225 25964.25 143.45 0.56
UK: FTSE 100 7633.45 48.26 0.64
Crude Oil Futures 74.42 0.75 1.02
Gold Futures 1843.80 3.20 0.17
Yen 133.60 0.19 0.15
Euro 1.0530 0.0008