U.S. stocks fell on Thursday as investors digested more weaker-than-expected labor market data that could help set the outlook for both interest rate cut hopes and the health of the U.S. economy.
The S&P 500 (^GSPC) fell about 0.6%, while the Dow Jones Industrial Average (^DJI) fell more than 350 points, or about 0.9%. The technology-heavy Nasdaq Composite (^IXIC) fluctuated between positive and negative territory. The indexes ended Wednesday’s volatile session mixed as they continued their slow start to September.
New data from ADP on Thursday showed that U.S. private employers posted their smallest monthly job growth since January 2021. Private-sector payrolls increased by about 99,000 jobs, well below expectations. At the same time, slightly fewer Americans filed new claims for unemployment benefits last week. Government data on Wednesday showed job openings fell.
The labor market data together serve as a prelude to Friday’s key August jobs report, which is crucial to the Fed’s policymaking process and is closely watched amid hopes for a “moderate” economy.
Markets have been divided on conflicting motives as data paints a gloomy picture of the economy. Recent weak readings suggest deeper interest rate cuts are needed. But they may also be a sign that the US is on the cusp of recession and a “soft landing” is no longer on the cards.
Traders see a roughly 50-50 chance that the Fed will cut interest rates by 0.5% at its September meeting.
Read more: Fed Forecast 2024: What Experts Say About Possible Rate Cuts
On the corporate front, earnings from HPE (HPE) and C3.ai (AI) shed some light on the growth prospects for AI. Shares of C3.ai fell 11% after the enterprise AI software maker reported weak subscription revenue. HPE shares fell amid disappointment over its profitability.
Meanwhile, Tesla (TSLA) pared earlier gains to rise 3%. The company plans to stick to plans to launch its fully self-driving software in China and Europe pending regulatory approval.
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