Stocks fell below record levels Wednesday, with investors weighing concerns over the economic impact of the ongoing pandemic against optimism over rebounding corporate earnings.
The S&P 500 opened lower a day after the index reached a record closing high. The Dow also fell, while the Nasdaq was little changed.
Investors considered a much weaker-than-expected report on private payroll growth last month. ADP reported that private-sector employers added back just 330,000 jobs in July, or fewer than half the expected gain of 690,000, according to Bloomberg consensus data.
The print, while typically an imprecise indicator of the Labor Department’s monthly non-farm payrolls reports, was nonetheless an indication of a labor market still struggling to recoup all of its pandemic-era losses. Friday’s “official” July jobs report is still expected to reflect a pick-up in hiring and the return of more workers to the labor market last month, helping to alleviate some of the labor scarcities rampant across industries.
Meanwhile, corporate earnings results from major U.S. companies continue to track mostly strongly. Shares of ride-hailing company Lyft (LYFT) gained after the company unexpectedly delivered adjusted EBITDA profitability for the first time since going public in 2019, with a pick-up in ridership during the reopening helping to fuel results. Oil and gas company Occidental Petroleum (OXY) also posted a surprise adjusted profit as energy demand rebounded.
Estimates-topping results from these and a myriad of other major U.S. companies have helped buoy stocks even as jitters around the spread of the Delta variant and concerns around a regulatory crackdown in China lingered. Treasury markets, however, have reflected some of these concerns, with the benchmark 10-year yield back below 1.2% and holding at the lowest levels since mid-July.
“Certainly when it comes to the Delta variant, that has been a driver of rates moving lower. And certainly concerns around China have also been a headwind. We do think those are largely driven outside the U.S., so when it comes to domestic factors, domestic growth actually looks fairly solid,” Stephanie Roth, JPMorgan private bank senior markets economist, told Yahoo Finance. “We expect over the long run domestic factors should win out and rates should move higher.”
In terms of equities, “Tactically, cyclicals should do fairly well, so we’re bar-belling cyclicals and tech here, and we think rates should certainly trend higher over the next 12 months,” Roth added.
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1:08 p.m. ET: Federal Reserve on track to begin raising interest rates in 2023, Clarida says
Federal Reserve Vice Chair Richard Clarida said Wednesday the central bank is still on track to begin raising rates off their current near-zero levels in 2023, as long as the economic recovery remains on its current trajectory.
“While, as Chair Powell indicated last week, we are clearly a ways away from considering raising interest rates and this is certainly not something on the radar screen right now, if the outlook for inflation and outlook for unemployment I summarized earlier turn out to be the actual outcomes for inflation and unemployment realized over the forecast horizon, then I believe that these three necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022,” Clarida said in prepared remarks during a virtual event hosted by the Peterson Institute for International Economics.
The “necessary conditions” Clarida was referring to are around pacing back toward maximum employment in the labor market, and bringing inflation to 2% and putting it on track to “moderately exceed” 2% for some time.
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10:06 a.m. ET: U.S. services sector expands by the most on record in July: ISM
The Institute for Supply Management’s July services index surged to a record high in July, with business activity rising as consumer mobility and travel demand picked up over the summer.
The ISM services index reached an all-time high of 64.1 last month, rising from 60.1 in June, according to the monthly report. This was well above estimates for 60.5, according to Bloomberg data. Readings above the neutral level of of 50.0 indicate expansion in a sector.
Beneath the headline index, a number of subindexes also posted strong growth for the month. The ISM employment subindex rose to 53.8 from 49.3 in June, flipping back into expansionary territory. New orders also accelerated, as did overall business activity and production. Still, however, ISM flagged that “materials shortages, inflation and logistics continue to negative impact the continuity of supply,” according to its report Wednesday.
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9:43 a.m. ET: Robinhood shares halted for volatility after second straight day of stock surge
Robinhood (HOOD) shares rocketed higher by 65% Wednesday morning to reach an all-time high of $77.03 a share, according to Yahoo Finance data. The surge triggered a volatility halt shortly after market open.
The stock surpassed its IPO price of $38 per share after languishing below this level for much of the past week. Shares began trading on the Nasdaq last Thursday.
A day earlier, Robinhood shares also jumped after Cathie Wood’s ARK Innovation Fund disclosed a stake in the newly public online brokerage firm.
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9:31 a.m. ET: Stocks open lower, Dow drops 200+ points
Here’s where markets were trading shortly after the opening bell:
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S&P 500 (^GSPC): -15.07 (-0.34%) to 4,408.08
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Dow (^DJI): -202.8 (-0.58%) to 34,913.60
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Nasdaq (^IXIC): -10.17 (-0.07%) to 14,751.52
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Crude (CL=F): -$1.89 (-2.68%) to $68.67 a barrel
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Gold (GC=F): +$20.50 (+1.13%) to $1,834.60 per ounce
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10-year Treasury (^TNX): -4.2 bps, yielding 1.132%
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8:30 a.m. ET: Private payroll growth markedly decelerated in July: ADP
Private sector employment slowed more notably than expected last month, reflecting ongoing strain in the labor market as the economy tries to recover all of its pandemic-era losses.
ADP’s closely watched private payrolls report showed that 330,000 jobs came back last month, compared to the 690,000 expected. In June, private payrolls rose by 680,000, with this metric revised down from the 692,000 previously reported.
Most of the gains came in the service-providing sector, or the area of the economy that lost the most jobs at the height of stay-in-place orders last year. Leisure and hospitality payrolls rose by 139,000 in July, which comprised more than 40% of the overall headline payroll gain, but still reflected a sharp deceleration after these industries added back more than 300,000 jobs in June.
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7:17 a.m. ET Wednesday: Stock futures trade mixed
Here’s where markets were trading Wednesday morning:
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S&P 500 (^GSPC): -4.25 (-0.1%) to 4,410.75
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Dow (^DJI): -53 (-0.15%) to 34,945.00
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Nasdaq (^IXIC): +7 (+0.05%) to 15,053.25
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Crude (CL=F): -$0.75 (-1.06%) to $69.81 a barrel
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Gold (GC=F): +$3.00 (+0.17%) to $1,817.10 per ounce
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10-year Treasury (^TNX): +0.8 bps to yield 1.182%
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6:10 p.m. ET Tuesday: Stock futures advance
Here’s where markets were trading Tuesday evening:
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S&P 500 futures (ES=F): -3 points (-0.07%) at 4,412.00
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Dow futures (YM=F): -27 points (-0.08%) to 34,971.00
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Nasdaq futures (NQ=F): -3 points (-0.02%) to 15,043.25
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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