U.S. stock benchmarks traded lower early Wednesday, but the decline was less severe than index futures had indicated, as data from ADP showed a jump in private payrolls in September.
However, investors are fixated on bond yields, with the 10-year Treasury note briefly climbing to highs not seen since June, amid fears about inflation. Investors also were watching the federal debt-ceiling debate in Washington, and the likelihood of tighter monetary policy from the Federal Reserve.
- The Dow Jones Industrial Average fell 212 points, or 0.6%, to 34,101.
- The S&P 500 declined 22 points, or 0.5%, to 4,322.
- The Nasdaq Composite Index traded 58 points, or 0.4%, lower to reach 14,378.
On Tuesday, the Dow Jones Industrial Average rose 312 points, or 0.92%, to 34315, the S&P 500 increased 45 points, or 1.05%, to 4346, and the Nasdaq Composite gained 178 points, or 1.25%, to 14434.
What’s driving the market?
A report from Automatic Data Processing Inc. showed that 568,000 private-sector jobs were created in September, outpacing estimates from The Wall Street Journal for 425,000. However, a reading for August was reduced to 340,000 from 374,000.
Still, the labor-market report, coming ahead of the more closely followed nonfarm payrolls report due Friday from the Labor Department, may be sufficient to meet the Federal Reserve’s criteria for “substantial further progress” as the central bank looks ready to taper its monthly purchases of Treasurys and mortgage-backed securities as the economy recovers from the COVID-19 pandemic.
Economists expect the economy added a net 500,000 jobs in September, up from the disappointing 235,000 jobs added in August, according to a Wall Street Journal poll. The unemployment rate is expected to tick down to 5.1% from 5.2%.
Meanwhile, rising bond yields may derail chances of any follow-up to Tuesday’s gains in stocks. Some investors were seeking haven in the U.S. dollar which rose as the yield on the 10-year Treasury note gained 2 basis points to 1.544%. European and most Asian stocks fell.
The combined effect of rising yields and a global energy crunch especially in Europe and Asia is triggering “more negative sentiment,” said Saxo Bank’s chief investment officer, Steen Jakobsen, in a note to clients.
“Yesterday’s session failed to take out the previous day’s high, so if the energy crunch narrative builds today with yields extending their rise, then we could see a renewed selloff,” said Jakobsen.
Natural-gas futures tapped fresh record prices on Wednesday in the U.K. and Europe, but were seen pulling back substantively on reports of increased supplies from Russia.
Technology stocks looked set to lead any selloff, as rising yields can be a negative for shares of fast-growing companies as they make those future cash flows appear less valuable.
What companies are in focus?
- Shares of Palantir Technologies Inc. jumped 5% after the data-software company said it won an $823 million Army contract.
How are other assets trading?
- Oil futures fell, with the U.S. benchmark down 1.7% to $77.59 a barrel. Gold futures dropped 0.1% to around $1,758.50 an ounce.
- In Europe, the Stoxx Europe 600 fell 1.3%, while London’s FTSE 100 dropped 1.5%.
- The Hang Seng Index closed down 0.5% in Hong Kong, while Japan’s Nikkei 225 dropped 1%. Markets in China remain closed for a holiday.