NEW YORK: Wall Street’s main indexes fell on Wednesday, as data providing further evidence of a strong labor market fueled concerns that the Federal Reserve would not have enough reason to temper its aggressive approach on interest rate hikes.
With markets already expecting another 75-basis point rate hike later in the day, investors are keenly waiting for any hints from the central bank on smaller increases in December.
US private payrolls increased more than expected in October, the ADP National Employment report showed, offering further evidence that the Fed’s rapid rate hikes have yet to significantly slow economic growth.
The report showed private payrolls rose by 239,000 jobs last month. Economists polled by Reuters had expected an increase of 195,000 jobs.
“Anytime you see (data) where the employment numbers are strong, it’s going to be negative, just in the sense that rates are going to continue to go higher,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
The private payrolls report follows a survey on Tuesday that showed a jump in US monthly job openings, which pointed to strong labor demand and doused hopes of a change in the central bank’s aggressive policy approach that had helped drive a strong rally for stocks in October.
Hopes of a less hawkish Fed had been driven by a previous batch of data pointing to a softening economy. A report on Tuesday also showed a slowdown in US manufacturing activity growth in October.
“We’ve been seeing conflicting data. It hasn’t been clear enough to say that they (the Fed) are going to slow down, but it’s not clear enough for them to continue to raise at 75 (bps) either,” Saluzzi said.
Traders are split on the odds of a 50 bps or 75 bps rate hike in December, according to CME Group’s Fedwatch tool.
The Fed’s interest rate decision is due at 2 p.m. ET (1800 GMT), but focus will be on commentary from Fed Chair Jerome Powell later.
The non-farm payrolls report due on Friday will offer further clues on the outlook for interest rates.
With the third-quarter earnings season having crossed the halfway mark, earnings growth estimates for S&P 500 companies have been slightly revised up to 4.8% from 4.7% the previous day.
Advanced Micro Devices Inc rose 2.2% after it forecast some strength in its data center business, while Airbnb Inc tumbled 8.9% on a bleak holiday-quarter revenue forecast. At 12:57 ET, the Dow Jones Industrial Average was down 68.79 points, or 0.21%, at 32,584.41, the S&P 500 was down 21.15 points, or 0.55%, at 3,834.95, and the Nasdaq Composite was down 106.60 points, or 0.98%, at 10,784.25.
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