U.S. stocks sank Thursday after economic data showed private payrolls rose more than expected last month and weekly jobless claims fell to a three-month low, pointing to continued tightness in the labor market that’s likely to keep the Federal Reserve on track for higher interest rates.
The S&P 500 (^GSPC) plopped 1% around noon, while the Dow Jones Industrial Average (^DJI) shed 350 points, or 1.1%. The technology-heavy Nasdaq Composite (^IXIC) tumbled by about the same percentage decline.
The ADP National Employment report showed private employment grew by 235,000 jobs in December. Economists surveyed by Bloomberg called for an increase of 150,000.
Elsewhere in economic data, filings for unemployment insurance also fell to 204,000, the lowest since September, in the week ended Dec. 31 from the prior week’s downwardly revised reading of 223,000, the Labor Department said Thursday.
The reports were the latest to reflect strong demand for workers, even as the Federal Reserve presses on with aggressive monetary tightening to rein in inflation. ADP’s data and weekly jobless claims follow a separate measure Wednesday that found job openings fell less than expected last month and remained high. The Labor Department’s monthly nonfarm payrolls survey due out Friday morning remains the most important reading for Fed officials and investors attempting to predict the next policy move.
“While we will get a better overall picture of the jobs market tomorrow, private payrolls beating expectations and jobless claims coming in below are indications that the labor market remains resilient,” Morgan Stanley Global Investment Office Head of Model Portfolio Construction Mike Loewengart said in a note. “These come on the heels of big-name companies announcing sizable job cuts so there is no doubt the market’s pressures are weighing on companies, but it remains to be seen when hiring will slow demonstrably.”
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