Wall Street slumped as a tight labor market was fueled by Fed unease

NEW YORK (Reuters) – U.S. stock indexes fell on Thursday after data pointing to a tight labor market fueled fears that the Federal Reserve will maintain its aggressive path to raise interest rates and result in a policy blunder that could tip the economy into recession. .

A report from the Labor Department showed that weekly jobless claims were lower than expected, indicating that the job market remains strong despite the Federal Reserve’s efforts to stifle demand for workers.

Expectations that the central bank will reduce the size of interest rate increases when announcing its policy next month remained unchanged in the report. Investors have been looking for signs of weakness in the labor market as a key component for the Federal Reserve to slow its policy tightening measures.

Other data showed that manufacturing activity in the Mid-Atlantic region eased again in January, while data from the Commerce Department confirmed the continued slack in the housing market.

“You have two types of data that are completely opposite — one is weakening in spending data and things like that, and on the other hand it’s still fairly strong employment data,” said Peter Tose, chairman of Chase Investments in Charlottesville, Virginia.

“It’s kind of a seesaw, you don’t know what the Fed is going to do in terms of raising interest rates again, to what extent, keeping it steady, are they going to overdo it?”

Dow Jones Industrial Average (.DJI) The Standard & Poor’s 500 Index fell 119.6 points, or 0.36%, to 33,177.36. (.SPX) It lost 13.93 points, or 0.35%, to 3,914.93 points, and the Nasdaq Composite. (nineteenth) It fell 60.48 points, or 0.55%, to 10,896.53 points.

Recent comments from Federal Reserve officials continue to highlight the disconnect between the central bank’s view of the final interest rate and market expectations.

Boston Fed Chair Susan Collins echoed other policymakers’ comments to support the case for higher interest rates beyond 5%. Fed Vice Chairman Lyle Brainard said the Fed is still “looking” at the level of interest rates that will be needed to control inflation.

However, markets see a final interest rate of 4.89% by June, largely priced in by a 25 basis point rate hike from the US central bank in February, with rate cuts in the second half of the year. .

The S&P 500 and the Dow were both on the verge of falling for the third consecutive session, the longest streak of declines in a single month.

On the earnings front, Procter & Gamble Co (PG.N) It fell 1.04% after a warning that commodity costs were pressuring earnings, despite raising its full-year sales forecast.

Analysts now expect S&P 500 companies’ year-over-year earnings to decline 2.8% for the fourth quarter, according to Refinitiv data, compared to a decline of 1.6% at the start of the year.

Netflix company (NFLX.O) It fell 0.94% ahead of results due after the closing bell on Thursday, when it is expected to report the slowest quarterly revenue growth.

Low issues outnumbered high issues on the NYSE by a ratio of 1.50 to 1; On the Nasdaq, the ratio was 1.63 to 1 in favor of declining stocks.

S&P 500 hits new 52-week high and two new lows; The Nasdaq index posted 37 new highs and 31 new lows.

(Reporting by Chuck Mikolajczak), Editing by Deba Babbington

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