Wall Street is drifting Thursday following signals that the job market remains solid, though it may be a touch too strong. The S&P 500 was virtually unchanged in early trading and on track for its first losing week in the last 10. The Dow Jones Industrial Average was up 82 points, or 0.2%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Quick Read
- Wall Street Performance: The S&P 500 was nearly unchanged in early trading, while the Dow Jones was up by 0.2% and the Nasdaq composite down by 0.2%.
- Individual Company Movements: Walgreens Boots Alliance’s stock dropped 10.6% after cutting its dividend, and Lamb Weston Holdings rose 5% following a strong profit report.
- Market Trend: U.S. stocks have regressed this week after a strong rally at the end of last year, partly due to expectations of inflation cooling and potential Federal Reserve rate cuts.
- Interest Rate Impact: Rate cuts tend to boost stock prices and relieve economic pressure, with Treasury yields already having decreased on such hopes.
- Job Market Reports: Recent job market data was stronger than expected, raising questions about the Federal Reserve’s rate cut plans.
- Federal Reserve’s Rate Strategy: The Fed’s current high interest rates aim to control inflation, and the strong job market might delay potential rate cuts.
- Upcoming Jobs Report: Economists anticipate a slowdown in U.S. hiring in the upcoming comprehensive jobs report.
- Market Expectations vs. Reality: Wall Street’s aggressive rate cut predictions might not align with a stronger-than-expected economy, potentially impacting stock prices.
- Treasury Yields: Following the job market reports, yields on 10-year and two-year Treasuries increased.
- International Markets: European markets were modestly higher, while Asian markets were mostly lower.
- Japanese Market Reaction: The Tokyo stock market reopened with a somber note after a recent earthquake, with the Nikkei 225 index falling 0.5%.
The Associated Press has the story:
Wall Street holds steady, and yields rise after strong data on jobs
Newslooks- NEW YORK (AP)
Wall Street is drifting Thursday following signals that the job market remains solid, though it may be a touch too strong. The S&P 500 was virtually unchanged in early trading and on track for its first losing week in the last 10. The Dow Jones Industrial Average was up 82 points, or 0.2%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Walgreens Boots Alliance sank 10.6% after it nearly halved its dividend so it could hold onto more cash. Lamb Weston Holdings climbed 5% after the maker of fries and other potato products reported stronger profit for the latest quarter than analysts expected.
U.S. stocks have broadly regressed this week after rallying powerfully into the end of last year. Critics said the market was due for at least a breather following the big run, which fed on hopes that inflation has cooled enough for the Federal Reserve to cut interest rates sharply this year.
Rate cuts give prices for stocks and other investments a boost, while also relaxing the pressure on the economy and financial system. Treasury yields in the bond market have already eased significantly since last autumn on hopes for such cuts, releasing pressure on the stock market.
But Treasury yields rose Thursday following a couple reports on the job market that were stronger than expected. The economy is in a delicate phase where investors want it to remain solid, but not too hot.
A strong job market is good for workers and further stamps out worries about an imminent recession. But too much strength could prod the Federal Reserve to hold the line longer on high interest rates because it could keep upward pressure on inflation. And the Fed has already hiked its main interest rate to the highest level since 2001.
One report on Thursday showed fewer U.S. workers filed for unemployment benefits last week than expected. Another said private employers accelerated their hiring last month by more than economists expected.
A more comprehensive report on the jobs market is arriving on Friday. Economists expect that to show U.S. hiring slowed to 160,000 jobs last month from 199,000 in November.
“If tomorrow’s numbers show the same kind of strength and the economy keeps rolling along, it’s fair to wonder why the Fed would be in a rush to cut rates,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley.
Traders are betting the Federal Reserve will cut interest rates by twice as much this year as it’s indicated. Wall Street is also thinking the first cut could come as soon as March, and a stronger-than-expected economy makes such aggressive predictions less realistic. Critics had already called them too aggressive.
Following Thursday’s reports on the job market, the yield on the 10-year Treasury rose to 3.98% from 3.91% late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for the Fed, climbed to 4.37% from 4.33%.
Stocks have already rallied in part on expectations for sharp cuts coming to interest rates soon. If the Fed doesn’t cut as deeply and as quickly as expected, prices for stocks and other investments could be in jeopardy.
In stock markets abroad, indexes were modestly higher in much of Europe and a bit lower in much of Asia.
In Tokyo, the mood was somber as the market reopened from the New Year holidays with a moment of silence after a major earthquake Monday left at least 77 people dead and dozens missing.
Dark-suited officials bowed their heads in a ceremony that usually features women clad in colorful kimonos. Japan’s benchmark Nikkei 225 fell 0.5%.
