The stock futures are lower today following the weaker-than-expected Automated Data Processing (ADP) employment report. This stated that private sector payrolls increased by 145,000 jobs in March, down from 261,000 jobs added in February. Additionally, Cleveland Fed President Loretta Mester said she expected interest rates to top 5% to curb inflation in a speech given late on Tuesday, which is currently higher than some market participants’ expectations. Later today, the Institute for Supply Management will release its Services Index for March, while S&P Global will report its final U.S. Services Purchasing Managers’ Index for March. We think the market will start weakly, but these reports could change the market’s direction.
The stock market fell yesterday after several days of higher trading, as the February Job Openings and Labor Turnover Survey, or J.O.L.T.S., was weaker than expected. Job openings declined to 9.931 million, falling below 10 million for the first time since May 2021 and suggesting that the labor market has cooled considerably. The largest declines in postings were in the professional and business services and healthcare sectors, while growth occurred in the construction and entertainment industries. These developments caused traders to sell their positions.
In all, the S&P 500 finished lower by 24 points (down 0.58%), the NASDAQ was off 63 points (down .52%), and the Dow Jones Industrial Average declined off 199 points (down .59%). Overall market breadth was quite negative yesterday, as decliners outpaced advancers by a 2.3-to-1.0 ratio. Utility stocks were among the best performers, while industrials equities were among the weakest.
In commodity news, oil prices fell yesterday, following several days of higher prices caused by supply cuts announced by OPEC (The Organization of Petroleum Exporting Countries) and its allies. Elsewhere, the U.S. Treasury bond yields increased across the board. The yield curve remains inverted, with short-term rates higher than long-term ones. Gold prices continued to rise, nearing all-time high levels, as traders moved into the commodity. Some traders use gold to hedge against inflation and systemic risk (such as the global banking concerns we have seen recently). The Chicago Board Options Exchange Volatility Index, or V.I.X., also increased as demand for options protection increased.
Several key economic reports will be released in the days ahead. These include initial and continuing jobless claims on Thursday, and the U.S. Labor Department report on job creation and the unemployment rate for March, due on Friday. Readers should also note that the stock market will be closed on Friday for the Good Friday holiday. Overall, we think most eyes will be on the state of the labor market and the broader economy in the coming days.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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