Market Snapshot: U.S. stocks fall as investors sift jobs data for clues to May employment report

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U.S. stocks lost ground, with technology shares leading the way lower on Thursday as investors sifted through labor-market data a day ahead of the eagerly awaited May jobs report.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average

    fell 250.20 points, or 0.87%, to 34,350.18.

  • The S&P 500

    dropped 37.28 points, or 0.9%, to 4,170.84.

  • The Nasdaq Composite

    slumped 193.41 points, or 1.4%, to 13,562.92.

On Wednesday, the Dow rose 25.07 points to eke out a fifth straight gain; the S&P 500 climbed 6.08 points, or 0.1%, to 4,208.12; the Nasdaq Composite Index advanced 19.85 points, or 0.1%, to 13,756.33.

What’s driving the market?

Private-sector employment jumped by 978,000 in May, according to the ADP National Economic Report, well above forecasts from economists surveyed by the Wall Street Journal who expected a gain of 680,000 jobs. Economists noted, however, that the ADP report hasn’t been a reliable guide to official jobs data over the course of the COVID-19 pandemic.

Meanwhile, weekly data on applications for unemployment benefits also painted a positive picture for the labor market. First-time claims for benefits fell to 385,000 last week, the first reading below 400,000 since the pandemic began.

“The U.S. economy is roaring back to life amid a successful vaccine programme and the reopening of businesses as pandemic restrictions are lifted. These data points bode well for tomorrow’s nonfarm payrolls which will be key in deciding the Fed’s next  steps,” said Fiona Cincotta, senior financial markets analyst at City Index.

Expectations of an earlier Federal Reserve move to tighten monetary policy as economic growth speeds up is reflected in a stronger dollar and weakness in high-growth technology stocks, which are more sensitive to interest-rate expectations, she said.

The Federal Reserve’s Beige Book, released on Wednesday, showed that the economy was experiencing moderate growth as it emerged from the COVID pandemic, as vaccinations and the easing of lockdowns playout, but it also highlighted supply-chain disruptions and labor shortages that could intensify fears of inflation.

The Fed’s policy makers have been saying that they expect inflation to be transitory. However, market participants say the Fed has been laying the groundwork for discussions around scaling back its accommodations if the economy overheats.

“The Fed is stealthily planting the seeds for normalizing monetary policy, which could become the dominant market theme by the late summer or fall, assuming US economic data remains strong,” wrote Marios Hadjikyriacos, investment analyst at XM, in a daily note.

Also Thursday, IHS Markit said its final U.S. services purchasing managers index reading came in at 70.4 in May versus an initial reading of 70.1. A figure above 50 indicates growth in activity. The Institute for Supply Management’s closely watched gauge of services activity is due at 10 a.m. Eastern.

Although the broader market moves have been subdued, so-called meme stocks, which have been heavily influenced by social media and not financial fundamentals, have been on a tear, including AMC Entertainment Holdings
GameStop Corp.

and Bed Bath & Beyond
raising concerns anew about bubbles forming in parts of the financial system amid the low-interest-rate environment.

On the public health front, the seven-day average for new U.S. cases has fallen 46% from two weeks ago, according to a New York Times tracker, and for hospitalizations has declined 22%, and deaths have dropped 35% as vaccinations continue to increase.  

The number of Americans fully vaccinated increased to 136 million, or 41% of the total population, while the number of people who are at least 18 years old who have been fully vaccinated grew to 133.8 million, or 51.9% of the population.

Which companies are in focus?
  • AMC shares fell 19% after it said Thursday morning that it plans to raise cash in a sale of up to 11.55 million shares from time to time through an equity-distribution agreement with B. Riley Securities Inc. and Citigroup Global Markets Inc. AMC shares were up 3,000% year-to-date through Wednesday’s close.

  • Tesla Inc. TSLA is recalling nearly 6,000 cars because brake caliper bolts may be lose and cause a loss of tire pressure, Reuters reported. Tesla shares fell 1.9%.

  • Shares of Express Inc. EXPR fell more than 20%, after the apparel retailer reported a narrower-than-expected fiscal first-quarter loss and revenue that rose above forecasts, as the company experienced an “inflection point” after Easter.

  • BJ’s Wholesale Club Holdings Inc. BJ said Thursday it is now offering Citizens Pay, a buy-now-pay-later payment option for purchases of more than $99. Shares were flat.

  • Furniture retailer Conn’s Inc. shares CONN soared 13%, after the company posted first-quarter earnings that crushed expectations. 

  • Delta Air Lines Inc.

    on Thursday said it expects to generate a pretax profit in the second half of 2021, driven by recovering demand for leisure, corporate and Transatlantic flights after a long period of weakness caused by the coronavirus pandemic. Shares fell 2.8%.

  • American Airlines Group Inc.

    said Thursday it still expects second-quarter system capacity, as measured per total available seat miles, to be down 20% to 25%, and for revenue to be down about 40% compared with the second quarter of 2019, the year before the pandemic decimated travel. Shares declined 2.2%.

What are other markets doing?
  • The yield on the 10-year U.S. Treasury note

    rose 1.3 basis points to 1.605%. Yields and bond prices move in opposite directions.

  • The ICE U.S. Dollar Index
    a measure of the currency against a basket of six major rivals, rose 0.4%.

  • Oil futures rose, with the U.S. benchmark

    up 0.4% at $69.09 a barrel, while gold futures

    retreated, falling 2%.

  • In European equities trading, the pan-Continental Stoxx Europe 600

    fell 0.2%, while London’s FTSE 100

    dropped 0.7%.

  • In Asia, the Shanghai Composite

    fell 0.4%, while the Hang Seng Index

    dropped 1.1%; Japan’s Nikkei 225

    rose 0.4%.

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