U.S. stocks stumbled on Thursday as investors digested weaker-than-expected labor market data that could help set expectations for both interest rate cut hopes and the health of the U.S. economy.
The S&P 500 (^GSPC) fell as much as 0.6%, while the Dow Jones Industrial Average (^DJI) dropped more than 350 points, or about 0.9%. The tech-heavy Nasdaq Composite (^IXIC) swung between positive and negative territory. The gauges ended Wednesday’s volatile session mixed as their slow start to September continued.
Private employers in the United States posted their slowest monthly hiring growth since January 2021, new ADP data showed Thursday. Private payrolls grew by about 99,000, well below expectations. Meanwhile, slightly fewer Americans filed a new claim for unemployment benefits last week. On Wednesday, government data showed job openings plummeted.
Taken together, the labor market data serve as a preview for Friday’s main August jobs report, crucial to the Fed’s policymaking and closely watched amid hopes for a “Goldilocks” economy.
The market is torn between conflicting impulses as data releases paint a discouraging picture for the economy. The recent weak readings justify deeper rate cuts, but could also be a sign that the US is on the verge of a recession and that a “soft landing” is no longer in the cards.
Traders see a nearly 50-50 chance that the Federal Reserve will cut rates by 0.5% at its September meeting.
Read more: Fed Predictions for 2024: What Experts Say About the Possibility of a Rate Cut
On the corporate front, earnings from HPE (HPE) and C3.ai (AI) shed some light on AI growth prospects. C3.ai shares fell 11% after the enterprise AI software maker posted weak subscription revenue. HPE stock fell amid disappointment over its profitability.
Meanwhile, Tesla (TSLA) pared earlier gains and rose 3%. The company plans to continue with plans to launch its fully self-driving software in China and Europe pending regulatory approval.
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