U.S. equities declined for a second straight day on Tuesday as data showing that the labour market stayed stable dampened expectations that the Federal Reserve would have sufficient justification to start scaling back the pace of its interest rate increases.
The poll suggested job postings in the United States unexpectedly increased in September, indicating that there is still a strong need for workers even if the central bank has started a course of aggressively raising rates in a bid to lower stubbornly high inflation.
Investors closely monitor labour market statistics for any indications of a worsening labour market because it would provide the Fed the justification it needed to start decelerating by raising interest rates by 50 basis points in December.
Stocks rallied in October, with the Dow recording its largest monthly percentage growth since 1976, on growing expectations that the central bank may have sufficient justification to start slowing in December. This expectation was aided by data showing that the economy is weakening and by a better-than-expected corporate earnings season.
Another report that revealed U.S. industrial activity grew at its slowest pace in over 2-1/2 years in the month of October as higher inflation cooled consumer demand and pricing pressures on manufacturers were buried by the intense attention on labour market statistics.
On rising hopes that the central bank may have enough justification to begin slowing in December, stocks soared in October, with the Dow posting its greatest monthly percentage rise since 1976. Data indicating the economy is faltering and a promising corporate earnings season both contributed to this view.
As increased inflation dampened consumer consumption and pricing pressures on manufacturers, U.S. industrial production grew at its slowest rate in more than 2-1/2 years during the month of October, according to a separate report that was overshadowed by the focus on labour market numbers.
According to Anthony Saglimbene, chief market analyst at Ameriprise Financial in Troy, Michigan, the market is concerned since it is well known that the Fed intends to slow back the labour market and hiring to reduce demand in the economy and so support inflation.
However, things appear to be very strong in terms of employment, which is putting some stress on equities.
The S&P 500 (.SPX) dropped 15.88 points, or 0.41%, to 3,856.1, the Nasdaq Composite (.IXIC) lost 97.30 points, or 0.89%, to 10,890.85, and the Dow Jones Industrial Average (.DJI) dropped 79.75 points, or 0.24%, to 32,653.2.
At 2:00 p.m., the Fed is scheduled to announce its policy statement. Investors will be eagerly watching any indications that the central bank is considering slowing down its rate hikes in the statement that will be released at 8:00 a.m. EDT (18:00 a.m. GMT) on Wednesday.
The finest S&P sector was energy (.SPNY), up 0.99%, helped by a rise in crude prices following an unsubstantiated rumour that China was considering relaxing its stringent COVID-19 requirements.
Additionally, it contributed to the increase in the value of Chinese companies’ U.S.-listed stock, including JD.Com, up 3.08%, and Alibaba Group Holding, up 3.59%.
Following an optimistic outlook for fourth-quarter profits, Uber Technologies (UBER.N) soared 11.97%, lifting the stock price of its rivals Lyft Inc (LYFT.O) and DoorDash (DASH.N) as well.
Pfizer (PFE.N) gained 3.14% following an increase in full-year sales projections for its COVID-19 vaccines, while Eli Lilly dropped 2.63% following a reduction in its profit outlook.
11.11 billion shares were traded on U.S. exchanges, compared to the 11.45 billion standards for the entire session for the previous 20 trading days.
On the NYSE, advancers outweighed decliners by a ratio of 1.56 to 1; on the Nasdaq, advancers were in the lead by a ratio of 1.29 to 1.
The Nasdaq Composite registered 120 new highs and 110 new lows, while the S&P 500 set 24 new 52-week peaks and eight new slumps.
