NEW YORK, Jan 5 — Wall Street’s main indexes were on course to open lower today after a stronger-than-expected jobs report signaled resilience in the labor market and tempered expectations of rapid interest rate cuts this year.
A Labor Department report showed US employers hired more workers than expected in December while raising wages at a solid clip. Non-farm payrolls increased by 216,000, compared with estimates for an increase of 170,000, according to economists polled by Reuters.
The unemployment rate held steady from November at 3.7 per cent, compared with expectations of a 3.8 per cent rise, while average earnings advanced 0.4 per cent on a monthly basis, against forecasts of 0.3 per cent growth.
“While the data confirms that the economy is strong and that a soft landing is in play, it’s a bit of a reality check for a market that was slightly ahead,” said Ross Mayfield, investment strategy analyst at Baird.
“This report certainly pushes expectations out a little bit and May is probably a good base case to use right now (for rate cuts).”
Money markets have scaled back expectations for a rate cut in March, with traders now seeing a 57 per cent chance of at least a 25-basis point cut, from nearly 65 per cent before the data, according to the CME Group’s FedWatch tool.
Yields on US Treasury notes, an indicator of interest rate expectations, ticked higher after the data, with the yield on the benchmark 10-year note climbing beyond 4 per cent to a three-week high.
On a weekly basis, the benchmark S&P 500 was on track for its worst performance since late October as investors cashed in after a nine-week winning streak driven by bets that aggressive rate cuts were on the horizon.
The Nasdaq was on course for its worst week since late September, impacted by rotation out of tech-heavy stocks into defensive sectors like healthcare, financials and utilities.
At 8.49am ET, Dow e-minis were down 144 points, or 0.38 per cent, S&P 500 e-minis were down 20.5 points, or 0.43 per cent, and Nasdaq 100 e-minis were down 78.75 points, or 0.48 per cent.
Among individual stocks, Tesla shed 0.8 per cent before the bell. The electric-vehicle maker is conducting an effective recall on 1.62 million vehicles in China, the market regulator said.
Other megacap names including Apple and Alphabet lost 0.6 per cent and 0.4 per cent, respectively.
Chipmakers Micron Technology, Intel and Qualcomm also declined between 1.8 per cent and 1 per cent.
Applied Therapeutics tumbled 31.9 per cent after the drug developer’s heart disease drug showed disappointing results in a late-stage trial.
Palantir Technologies lost 4.5 per cent after Jefferies downgraded the data analytics firm to “underperform” due to high stock valuations. Later in the day, investors will parse remarks by Richmond Federal Reserve President Thomas Barkin, a voting member this year. — Reuters
