By Anna Hirtenstein
US stocks faltered on Thursday as new weekly data showed a continued recovery in the labor market and traders closely watched for any potential policy changes from the Federal Reserve.
The S&P 500 fell 0.2% after rising 0.1% on Wednesday. The Dow Jones Industrial Average rose 0.1%, while the Nasdaq Composite lost 0.8%, dragged down by tech stocks that propelled the market higher during the pandemic.
Investors watched the economic recovery and signs of a corresponding increase in inflation, and assessed how this would affect the Federal Reserve’s monetary policy. New economic reports Thursday morning added to those concerns.
The latest weekly jobless claims hit a new pandemic low, and ADP estimated that nearly a million private sector jobs were created in May.
Meanwhile, the Federal Reserve on Wednesday announced plans to sell corporate bonds and exchange-traded funds it amassed last year as part of its emergency measures. Although the holdings are tiny – less than $ 15 billion in total – some traders have seen it as a harbinger of a change in Fed policy.
“This is a significant, marginal change in the Fed’s body language,” said Peter Cecchini, research director at Axonic Capital hedge fund. “However, they are more concerned about strong asset prices and inflation than they suggest.”
Friday’s monthly jobs report will offer new insights into the labor market recovery, which worries Fed officials.
“Inflation and central banks continue to be focused on lowering them,” said Caroline Simmons, UK investment manager at UBS Global Wealth Management. “If the job market gets stronger than what the people expect, then this will raise the debate that the economy is on the right track, job growth is good and therefore we will end up with wage increases and at some point domestic inflation. ”
Movements in major stock indexes have been muted in recent days as investors assess signs that the economic rebound could slow or weaken, with booming supply chains pushing up input costs for a range of products. Concerns about the high valuations of many stocks following the multi-month rally in US markets are also causing some investors to reflect.
“We are seeing a spike and a cap in the data” as the rate of change from the lows of the pandemic eases, said Grace Peters, investment strategist at JP Morgan Private Bank. “This is leading to some indigestion in the markets: we have seen the stock markets stabilize over the last month, which is very much related to the peak data.”
Another Federal Reserve report released on Wednesday noted a resumption in growth as consumers return to restaurants and stores, but also said supply chain disruptions and acute labor shortages work lead to an increase in prices.
The churn rate in the market has also hit stocks even. AMC Entertainment Holdings slipped 30%, wiping out its pre-market gains, after the company asked regulators to sell more than 11 million new shares.
“Under these circumstances, we do not recommend that you invest in our Class A common stock unless you are prepared to take the risk of losing all or a substantial part of your investment,” the company said in the filing. the SEC.
Meanwhile, a handful of other popular stocks on the online forums continued to soar in frenzied trading. BlackBerry gained 7.7% and Sundial Growers climbed 19%.
“It’s pretty amazing price reactions, but if something goes up that much it usually goes down again because it’s not based on fundamentals,” Ms. Simmons said. “These things don’t usually end well; it’s very volatile and people can lose a lot of money depending on when they come in and when the stock corrects itself.”
In bond markets, the yield on the benchmark 10-year Treasury bill climbed to 1.614% from 1.591% on Wednesday. Yields increase when prices fall.
Overseas, the pan-continental Stoxx Europe 600 index fell by a record, losing less than 0.1%. In Asia, the major benchmarks were mixed. The Shanghai Composite Index slipped 0.4%, while Japan’s Nikkei 225 rose 0.4%. Hong Kong’s Hang Seng Index fell 1.1%.
Paul Vigna contributed to this article.
Write to Anna Hirtenstein at [email protected]
(END) Dow Jones Newswires
June 03, 2021 11:57 ET (15:57 GMT)
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