By Yasin Ebrahim
Investing.com -- The Dow fell Thursday, paced by a slump in tech from rising Treasury yields as data continued to point to a tight labor market fueling fears of aggressive Federal Reserve tightening just a day ahead of the December jobs report.
The Dow Jones Industrial Average slipped 1%, or 339 points, the Nasdaq Composite was down 1.5%, and the S&P 500 fell 1.2%.
A duo of reports comes showing that better-than-expected private job gains in November and fewer initial weekly jobless claims firmed up bets that the Fed will have more work to do restore supply and demand balance in a tight labor market that threatens to push wages higher.
Private payrolls grew by 235,000 in November, according to a report released Thursday by ADP (NASDAQ:ADP) and Moody's Analytics, well above economists’ forecast of 150,000. Initial jobless claims fell to the lowest level since Sept. 24, with economists warning that claims were likely to trend higher despite the recent headlines of layoffs at major companies.
The report comes just a day ahead of the December jobs report that is expected show that the economy created about 200,000 jobs last month and the unemployment rate remained steady at 3.7%. Wage growth will likely dominate attention and is expected to slow to 0.4% for the month and 5% on an annualized basis from 0.6% and 5.1%, respectively.
Federal Reserve Bank of St. Louis President James Bullard said that while inflation is too high, the rates are getting closer to a “sufficiently restrictive zone.”
Treasury yields jumped sharply on the news, putting pressure on the rate-sensitive sectors of the market including tech.
Microsoft (NASDAQ:MSFT) was the biggest drag on tech for the second-straight day after UBS raised concerns a day earlier about slowing growth in the tech giant’s cloud and office businesses.
Oppenheimer, however, said Microsoft looks “attractive,” and dismissed concerns about prolonged weakness in cloud growth, saying “secular growth should resume from massive improvement in cloud productivity and dozens of new unforeseen PaaS-like services and apps.”
Amazon (NASDAQ:AMZN), meanwhile, fell more than 2% after the e-commerce giant confirmed plans to cut just over 18,000 jobs to save costs. The move followed an earlier warning from the company in December, when it warned of “more role reductions” in early 2023.
On the earnings front, pharmacy operator Walgreens Boots Alliance (NASDAQ:WBA) raised its full-year outlook after reporting better-than-expected quarterly results. But its shares fell 6%.
Bed Bath & Beyond (NASDAQ:BBBY) plunged 30% after warning of bankruptcy as losses mount. The home goods retailer said it expects to report third-quarter revenue of $1.26 billion, below Wall Street estimates of $1.404 billion analysts.
Energy was the only sector in the green, underpinned by rising oil prices followed mixed weekly petroleum data showing a larger build in U.S. crude supplies, but smaller increase in gasoline supplies.
Valero Energy Corporation (NYSE:VLO), ConocoPhillips (NYSE:COP) and Exxon Mobil (NYSE:XOM) were among the top gainers, with some on Wall Street continuing to favor the sector as a slowing economy isn’t likely to significantly dent energy demand.
“We like ExxonMobil and the oil and gas space because there's a limited supply of oil and gas, and demand hasn't been impacted that dramatically,” Austin Graff, Founder and chief executive officer at Opal Capital told Investing.com’s Yasin Ebrahim in an interview on Thursday. “Historically, in recessions, or at least minor recessions, demand doesn't take a massive hit,” Graff added.
On the geopolitical front, Russian president Vladimir Putin reportedly ordered a 36-hour ceasefire over Orthodox Christmas on Jan 6-7. But hopes that the move could lead to peace talks appear slim as Putin said a condition for a dialogue would require Ukraine to accept the "new territorial realities" which include the occupied territories annexed by Russia.
Ukrainian presidential adviser Mykhailo Podolyak rejected the proposal for a temporary truce and called it a "propaganda gesture".