S&P 500, Nasdaq muted after upbeat private payrolls data

By Johann M Cherian and Shristi Achar A

(Reuters) – The benchmark and the Nasdaq were subdued on Thursday after a jobs report indicated resilience in the labor market, tempering expectations of how early interest-rate cuts could begin.

Wall Street stumbled in the first two sessions of 2024, with the S&P 500 notching its worst two-day performance since late October as investors booked profits after a blistering rally last year.

Bets that the Federal Reserve could start reducing interest rates this year had driven much of the gains towards the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

Traders see a 66.4% chance for at least a 25-basis point (bps) rate cut in March and a near 92% probability for May, according to the CME Group’s (NASDAQ:) FedWatch tool.

An ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent strength in the labor market that should continue to sustain the economy.

Private payrolls increased by 164,000 in December, compared with a 101,000 rise the month before. The report comes ahead of the official employment data due on Friday.

“It puts a question mark as to whether or not tomorrow’s official employment data will be more than what markets expect,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

“This plays into the hands of whoever is expecting a soft landing. But let’s not forget that we’ve had a big rally so what we’re seeing, what we saw in the past couple of days, was a technical adjustment.”

Separately, a weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

Yields on longer-dated U.S. Treasury tenors rose after the data, with the yield on the benchmark 10-year note climbing to 3.991%. [US/]

Investors also assessed the S&P Global’s final reading of composite PMI data for December at 50.9, compared with a preliminary reading of 51.0.

In company news, Apple (NASDAQ:) slid 1.4% after brokerage Piper Sandler downgraded the iPhone maker to “neutral”, days after Barclays also cut its rating.

Dow component Merck added 1.7% after TD Cowen upgraded the drugmaker to “outperform” on growth prospects.

At 9:50 a.m. ET, the was up 102.81 points, or 0.27%, at 37,533.00, the S&P 500 was up 0.60 points, or 0.01%, at 4,705.41, and the was down 54.92 points, or 0.38%, at 14,537.30.

Consumer discretionary and information technology stocks led declines among the 11 S&P 500 sectors, down 0.4% each.

Micron Technology (NASDAQ:) gained 1.1% after brokerage Piper Sandler upgraded its recommendation on the chipmaker to “overweight”.

Mobileye Global (NASDAQ:) sank 26.3% after forecasting preliminary fiscal 2024 revenue below estimates.

Walgreens Boots Alliance (NASDAQ:) reversed premarket gains to shed 10.9% after the U.S. pharmacy chain nearly halved its dividend.

Advancing issues outnumbered decliners by a 1.10-to-1 ratio on the NYSE and by a 1.02-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and no new low, while the Nasdaq recorded 14 new highs and 30 new lows.