Markets: News  

By Isabel Wang and William Watts

Dow down nearly 300 points as Wall Street closes the books on a choppy August

U.S. stocks ended lower on Wednesday as sluggish job growth in the private sector and anxieties about a looming recession following Chair Powell's Jackson Hole speech drove major indexes to their fourth straight losing session.

What happened

On Tuesday, the Dow fell 308 points, or 1%, while the S&P 500 and Nasdaq Composite each dropped 1.1%.

According to Dow Jones Market Data. The Dow finished August down 3.9%, while the S&P 500 brought its loss for the month to 4.2%. The Nasdaq posted a monthly drop of 4.6%.

Deep Dive:Here are the worst (and best) performing stocks of August and for 2022

What drove markets

Stocks extended a losing streak to four sessions on Wednesday as three major benchmarks recorded around 4% of losses for the month of August.

Ahead of the opening bell, ADP estimated that U.S. private-sector employment rose by 132,000 in August, while annual pay rose 7.6%.

The ADP figure came in below forecasts, but economists and analysts said they were still attempting to figure out how to assess the revamped data series after the previous version proved to be an unreliable guide to official monthly jobs data from the U.S. Labor Department. ADP has said the new series is meant to be a complement to the official figures rather than a guide.

"With only limited details as to how they arrived at that number, we have little confidence that this new survey will prove to be any more accurate a guide to the official payrolls tally than the previous incarnation," said Michael Pearce, senior U.S. economist at Capital Economics, in a note.

The August jobs report that is scheduled for release on Friday is expected to show the economy added 318,000 jobs, according to a survey of economists by The Wall Street Journal. The unemployment rate is seen steady at 3.5%, while the average hourly earnings are estimated to rise 0.4% following a 0.5% rise the previous month.

See: U.S. likely added 318,000 jobs this month -- but beware an August surprise

"We held a view over the past 2-3 months that 'bad dataflow will start to be seen as good', and believe this will likely continue to hold," said Mislav Matejka, equity strategist at JP Morgan. "For example, last week in the U.S., the very weak PMIs [purchasing managers indices] and weak housing dataflow were met by favorable equity trading on the day, lending support to this call."

Three major indexes retreated in the previous three sessions, after Fed Chairman Jerome Powell last Friday raised fears that the central bank would persevere with higher interest rates to combat inflation even if it meant damaging the economy and hurting the stock market.

The choppy trading on Wednesday came after better-than-forecast U.S. jobs and consumer confidence reports on Tuesday were seen allowing the Fed to fully prosecute its aggressive monetary tightening policy, a move that appeared to reinforce the market mantra that good economic news would be bad for stocks, and vice versa.

Meanwhile, investors worry the U.S. is on the brink of an economic downturn with one economist predicting a 'whopper' of recession in 2023, and inflation seen remaining high through 2024 because of the growth in money supply. According to Dan Raju, chief executive officer of Tradier, a brokerage service provider, most retail investors still trade as though a recession is a foregone conclusion at this stage.

"They (retail investors) find opportunity in really short term strategies, but it is more of a wait-and-see before they implement anything long term," said Raju in an interview with MarketWatch on Wednesday.

According to Raju, one of the key indicators to decide if an investor is bullish or not about the market is to see how much cash is sitting in the account. "Most traders generally tend to have an average of 40 to 45% of the total portfolio in cash, when it comes to active retail traders. I've seen that now touch like 60 to 65%," he added.

See:A 4% fed funds rate is on traders' radar for 2022. But it could take up to two years for hikes to make a big inflation impact

Companies in focus

How did other assets fare

-- Jamie Chisholm contributed to this article.

-Isabel Wang

(END) Dow Jones Newswires

August 31, 2022 16:32 ET (20:32 GMT)

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