Stocks fell on Wednesday in directionless trade, extending he previous day’s declines as rising COVID-19 infections momentarily upended expectations about growth.
In Tuesday’s regular session, the Dow Jones Industrial Average and S&P 500 Index lost ground, but the technology-laced Nasdaq bucked the trend by posting a marginal gain. The market has mostly taken disappointing news in stride, but August’s jobs data falling far short of market expectations last week tempered hopes for the fourth quarter.
Payrolls showed the economy creating a relatively slim 235,000 new positions, and stoked speculation that the Federal Reserve’s Open Market Committee (FOMC) could alter its timetable for scaling back its stimulative bond-buying, which has propped up investor confidence.
It also prompted analysts to scale back expectations for the economy for the remainder year. Goldman Sachs cut its forecast for fourth-quarter growth, citing a “harder path ahead” for consumer spending in the face of rising COVID-19 infections.
However, Wall Street does not appear overly-concerned, at least for now, given that stocks are still within view of recent highs. Meanwhile, the JOLTS report for July — the most recent read on the labor market released on Wednesday — showed that there are still a record number of job openings at nearly 11 million unfilled positions.
“We think the fundamental drivers of strong earnings, an accommodative Fed, and still a healthy appetite for risk taking are really what’s going to support the market for the rest of the year,” Yung-Yu Ma, BMO Harris’ chief investment strategist, told Yahoo Finance Live on Wednesday.
While the ongoing COVID-19 pandemic fueled by the Delta variant figured prominently in the jobs miss, especially for softness in the leisure, hospitality and bars/restaurant sector, some analysts have also pointed to the labor shortage becoming a drag on jobs creation. A lack of available workers have prompted businesses to hike pay, adjust hours, and even lose some business.
“With respect to no job gains in leisure and hospitality, while I’m not discounting the influence of Delta on consumer behavior for some and the supply problems out of Asia because of Covid dictated restrictions, I’m mostly blaming the lack of workers,” veteran market analyst Peter Boockvar said in a research note to clients on Tuesday.
He pointed to National Federation of Independent Business data on Friday that showed plans to hire, positions not able to fill and compensation all at 48-year highs, all records for the survey.
With the trading week shortened by Labor Day, traders will be keeping an eye on producer prices data for hints at inflation pressures, as well as the end of a crucial source of unemployment insurance during the pandemic.
Millions of Americans were offered additional unemployment support during the pandemic with augmented federal unemployment benefits. However, those benefits expired over the weekend, and economists think it will help bolster a labor market that’s suffered from a lack of workers.
According to a Goldman Sachs analysis, “unemployed workers whose benefits ended early saw a statistically significant increase in their re-employment probability … So we expect the benefit expiration to boost job growth in coming months.”
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1:15 p.m. ET: ‘If bonds could speak’
The auction for the 10-year Treasury note was a good one, with yields checking in below issued level, and bid to cover (2.59) comfortably above the 12-month average (2.42).
While it may be too soon to tell, there may be a “flight to quality” element behind the demand in the latest auction, especially with Delta variant fears swirling and prices still rising. Market veteran Peter Boockvar imagines what Treasuries would say if they had a voice:
Bottom line, if bonds could speak. Is this aggressive demand because buyers see a stagflationary environment and are more worried about the stag part? Is the demand great because there is the assumption that the Fed taper is soon beginning and it always pays to flatten the curve when done so? Are the buyers in the ‘inflation is transitory’ camp even though 10 yr inflation breakevens are only a few bps from the highest since early June? Is it the Delta variant? If bonds could speak. Either way, the 10 yr yield is just below 1.34% from 1.35% just before the results.
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12:05 a.m. ET: Stocks sag in directionless trade
Here’s where markets were trading around midday:
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S&P 500 (^GSPC): 4,501.17, -18.86 (-0.42%)
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Dow (^DJI): 34,969.76, -130.24 (-0.37%)
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Nasdaq (^IXIC): 15,228.57, -145.76 (-0.95%)
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11:45 a.m. ET: Jobs market still JOLT-ed by turnover
In spite of Delta variant concerns, job openings in July as measured by JOLTS soared by a staggering 749,000 — hitting yet another all-time high just shy of 11 million open jobs. All the concerns about COVID aside, this is one of the hottest job markets in history — if not THE hottest.
JPMorgan Chase noted that the number of hires fell to 6.67M from 6.83M in June:
Thus, the ratio of openings to hires—which is a measure of labor market tightness and the ease with which firms can find workers—moved upward to 1.64, a historically high level of tightness. At the same time, the rate of quits was unchanged in July at 2.7%, remaining at a level higher than any attained prior to the pandemic.The tightening of the labor market in July after easing modestly in June suggests that labor demand is continuing to outpace labor supply.
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10:30 a.m. ET: Bitcoin heavy as traders mull ‘flash crash’
The world’s premier digital currency has lots of fans and, as of Tuesday, the backing of a national government. However that’s done little to curb bitcoin’s (BTC-USD) wild price swings, like the one yesterday that saw the unit tumble by over 17% intraday before recovering.
According to Sultan Ahmed, analyst at GlobalData, Tuesday’s “flash crash” and the rocky El Salvador rollout “are two uncorrelated events. Many have linked the drop in value to initial functional issues of Chivo [El Salvador’s Bitcoin wallet] during the early hours of beta testing, but we believe that the drop in Bitcoin was instead due to excessive leverage trading within the cryptocurrency market.”
Bitcoin last traded around $46,283, down over 7% on the day. The cryptocurrency is still up over 50% over the past 50 days, according to Ahmed, in the wake of over $3 billion in liquidation.
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9:30 a.m. ET: Stocks dip at the open
Here’s where markets were trading at the opening bell
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S&P 500 (^GSPC): 4,515.55, -4.48 (-0.10%)
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Dow (^DJI): 35,137.11, +37.11 (+0.11%)
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Nasdaq (^IXIC): 15,314.88, -59.45 (-0.39%)
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Crude (CL=F): $69.64 per barrel, +$1.29 (+1.89%)
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Gold (GC=F): $1,798.70, +0.20 (+0.01%)
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10-year Treasury (^TNX): -1.2 bps to yield 1.353%
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7:35 a.m. ET Wednesday: Stock futures marginally lower
Here’s where markets were trading ahead of the opening bell:
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S&P 500 futures (ES=F): 4,518.50, -0.75 (-0.02%)
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Dow futures (YM=F): 35,086.00 -5.00 (-0.01%)
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Nasdaq futures (NQ=F): 15,669.00, -5.75 (-0.04%)
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6:15 p.m. ET Tuesday evening: Stock futures weaken
Here’s where markets were trading in the after-hours session:
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S&P 500 futures (ES=F): 4518, -1.25
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Dow futures (YM=F): 35,082, -9.00
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Nasdaq futures (NQ=F): 15,673.00, -2.00
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By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek
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