By Anna Hirtenstein and Paul Vigna
U.S. stocks wobbled Thursday as fresh weekly data showed a continued recovery in the labor market and traders kept a close eye on any potential policy shifts from the Federal Reserve.
The S&P 500 fell 0.3% after ticking up 0.1% on Wednesday. The Dow Jones Industrial Average slipped less than 0.1%, while the Nasdaq Composite lost 0.9%, dragged down by the tech stocks that propelled the market higher during the pandemic.
Investors have been watching the economic recovery–and signs of a corresponding jump in inflation–and gauging how it will affect the Federal Reserve’s monetary policy. Thursday’s rosy economic reports added to the concerns.
The latest weekly jobless claims report hit a new pandemic low, and ADP estimated that nearly a million private-sector jobs were created in May.
Meanwhile, the Federal Reserve announced plans Wednesday to sell the corporate bonds and exchange-traded funds it amassed last year as part of its emergency measures. While the holdings are tiny–less than $15 billion in total–some traders took it as an early warning sign of shifting Fed policy.
“That’s an important shift, on the margins, in Fed body language,” said Peter Cecchini, director of research at hedge fund Axonic Capital. “It says they are more concerned about buoyant asset prices and inflation than they are letting on.”
Friday’s monthly jobs report will offer fresh insights into the recovery in the labor market, which Fed officials have said they remain concerned about.
“There is a continued focus on inflation and central banks and when they taper,” said Caroline Simmons, U.K. chief investment officer at UBS Global Wealth Management. “If the labor market comes in stronger than people are expecting, it will then raise the debate that the economy is on track, job growth is good and therefore we’ll end up with wage increases and at some point, domestic inflation.”
The moves in major stock indexes have been muted in recent days as investors weigh signs that the economic rebound may slow or falter, with snarled supply chains bolstering input costs for an array of products. Concerns about high valuations for many stocks following the monthslong rally in U.S. markets are also giving some investors pause.
“We’re seeing some peaking and plateauing of the data” as the rate of change from the lows of the pandemic smooths out, said Grace Peters, an investment strategist at J.P. Morgan Private Bank. “This does lead to some indigestion in markets: we’ve seen equity markets plateau over the last month, which is very much tied to peak data.”
A separate Federal Reserve report on Wednesday noted a pickup in growth as consumers return to restaurants and stores, but also said supply-chain disruptions and acute labor shortages are leading to price increases.
The market churn hit the meme stocks as well, with AMC Entertainment Holdings swinging violently. The stock rose in premarket trading before the company filed with regulators to sell more than 11 million new shares. It fell by nearly 40% earlier in the session and most recently was down just 3%.
“Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” the company said in the SEC filing.
Meanwhile, a handful of other stocks popular on online forums continued to move erratically in frenzied trading. BlackBerry gained 7.3% after trading up more than 20%, and Sundial Growers climbed 12%.
“These are quite astonishing price reactions, but if something goes up that much, it usually comes down again, as it’s not based on fundamentals,” said Ms. Simmons. “These things usually don’t end well; it is very volatile and people can lose quite a lot of money depending on when they go in and when the stock corrects.”
In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.622% from 1.591% on Wednesday. Yields rise when prices fall.
Overseas, the pan-continental Stoxx Europe 600 pulled back from a record, slipping 0.1%. In Asia, the major benchmarks were mixed. The Shanghai Composite Index slipped 0.4%, while Japan’s Nikkei 225 advanced 0.4%. Hong Kong’s Hang Seng Index declined 1.1%.
(END) Dow Jones Newswires
June 03, 2021 15:07 ET (19:07 GMT)
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