U.S. stocks faltered on Thursday as investors digested further weaker-than-expected labor market data that could boost hopes for interest rate cuts and the health of the U.S. economy.
The S&P 500 (^GSPC) lost as much as 0.6%, while the Dow Jones Industrial Average (^DJI) fell more than 350 points, or about 0.9%. The tech-heavy Nasdaq Composite (^IXIC) fluctuated between positive and negative territory. The indexes ended Wednesday’s volatile session mixed as their sluggish start to September continued.
Private employers in the U.S. posted the smallest monthly hiring gain since January 2021, new data from ADP showed Thursday. Private sector payrolls grew by about 99,000, well below expectations. Meanwhile, slightly fewer Americans filed new unemployment claims last week. On Wednesday, government data showed a collapse in job openings.
Together, the labor market data serve as a preview of Friday’s August jobs report, which is key to the Fed’s monetary policy decisions and is being closely watched amid hopes for a “Goldilocks” economy.
The market is torn between conflicting impulses as data releases paint a gloomy picture of the economy. The latest weak numbers suggest even deeper rate cuts. But they could also be a sign that the US is on the brink of recession and a “soft landing” is no longer an option.
Traders believe there is a nearly 50-50 chance that the Federal Reserve will cut interest rates by 0.5 percent at its September meeting.
Read more: Fed forecasts for 2024: What experts say about the possibility of a rate cut
At the corporate level, earnings from HPE (HPE) and C3.ai (AI) shed some light on growth prospects in the AI space. C3.ai shares slumped 11% after the enterprise AI software maker reported weak subscription revenue. HPE stock also slipped on profitability disappointment.
Meanwhile, Tesla (TSLA) pared earlier gains to rise 3% as the company said it would stick to its plans to roll out its fully autonomous driving software in China and Europe, subject to regulatory approval.
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