Wall St slides as labor market data fuels Fed concern

  • Procter & Gamble tumbles after commodity price pressure warning
  • Netflix down ahead of quarterly results
  • Dow down 0.76%, S&P 500 down 0.76%, Nasdaq down 0.96%

NEW YORK, Jan 19 (Reuters) – U.S. stock indexes closed lower on Thursday after data indicating a tight labor market rekindled fears the Federal Reserve will continue its aggressive rate-hike path that could drag the economy down. in a recession.

A Labor Department report showed weekly jobless claims were below expectations, indicating that the labor market remains strong despite the Fed’s efforts to stifle demand for workers.

Expectations that the central bank would further reduce the scale of its interest rate hikes when it announces policy next month were not changed by the report.

Investors have been looking for signs of weakness in the labor market as a key ingredient needed for the Fed to start easing its policy tightening measures.

Unemployment benefit claims

Other data showed manufacturing activity in the Mid-Atlantic region subdued again in January, while Commerce Department data confirmed the housing market slump persisted.

“What we’re seeing is the market bottoming out in uncertainty so the news has less of an effect and what we’re seeing today is really just a continuation of that.” , said Brad McMillan, chief investment officer of the Commonwealth Financial Network. , an independent broker in Waltham, Massachusetts.

“The fact that we’re not seeing more of a reaction indicates that a lot of bad news is out there.”

The Dow Jones Industrial Average (.DJI) fell 252.4 points, or 0.76%, to 33,044.56, the S&P 500 (.SPX) lost 30.01 points, or 0.76%, to 3,898.85 and the Nasdaq Composite (.IXIC) fell 104.74 points, or 0.96%, to 10,852.27.

Traders work at the post where Carvana Co. trades on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 7, 2022. REUTERS/Brendan McDermid

Recent comments from Fed officials continue to underscore the disconnect between the central bank’s view on its terminal rate and market expectations.

Boston Fed President Susan Collins echoed comments from other policymakers to bolster the case for raising interest rates beyond 5%.

But stocks moved off their session lows after Fed Vice Chairman Lael Brainard said the Fed was still “probing” the level of interest rates that will be needed 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 US central bank in February, with rate cuts in the second. half of the year. .

The S&P 500 and the Dow Jones fell for a third consecutive session, their longest streak of declines in a month.

On the earnings front, Procter & Gamble Co (PG.N) fell 2.11% after warning that raw material costs would put pressure on profits, despite its higher sales forecast for the year whole.

Analysts now expect year-over-year earnings for S&P 500 companies to decline 2.8% in the fourth quarter, Refinitiv data shows, from a 1.6% decline at the start. of the year.

Netflix Inc (NFLX.O) closed down 3.23% ahead of its expected earnings 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.

Falling issues outnumbered rising ones on the NYSE by a ratio of 1.49 to 1; on the Nasdaq, a 1.70-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week high 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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