U.S. stocks end mixed as investors await July jobs report
By Isabel Wang and William Watts
Fed official Mester said the economy is not in a recession right now, but the risks are going up.
U.S. stocks closed mostly lower on Thursday as investors weighed another batch of corporate earnings and looked ahead to Friday's July employment report for insights on the health of the labor market and the economy.
Stocks bounded back sharply Wednesday after back-to-back losses. The Dow jumped 416.33 points, or 1.3%, while the S&P 500 rose 1.6% and the Nasdaq Composite jumped 2.6%.
What drove the market
Stocks drifted lower after data showed first-time claims for U.S. jobless benefits rose by 6,000 to 260,000 in the week ended July 30. Investors were seen largely looking past Thursday's data ahead of the July employment report due Friday.
"With the jobs report coming tomorrow, today's slight uptick in jobless claims isn't likely to be a major market nor Fed mover. Investors will be waiting to see if the labor market can withstand the Fed's rate-hike campaign as well as it did in June," said Mike Loewengart, managing director for investment strategy at E-Trade from Morgan Stanley, in emailed comments.
"Remember that while jobless claims have been slowly rising, the labor market remains robust," he wrote.
Employment gains in July are expected to drop to 258,000 from 372,000 in the prior month, a poll of economists by The Wall Street Journal estimates. If so, it would mark the smallest increase since December 2021.
"We should anticipate a drop from recent levels, but perhaps not too big a drop, as demand remains strong. The 250,000 expectations look reasonable, and perhaps even a bit conservative," said Brad McMillan, chief investment officer at Commonwealth Financial Network, in emailed comments on Thursday. "If we get anything in the 200,000-300,000 range, that would be in line with the data so far this year and support continued growth."
However, worse results would signal that the U.S. economy has "suddenly gotten much worse, and a recession is going to happen sooner rather than later--and that would spook markets," according to McMillan.
See: Hiring slowdown? U.S. seen adding just 258,000 jobs in July
U.S. stocks were lifted Wednesday by data that showed resilience in the services sector and strong factory orders.
Federal Reserve officials have continued to warn that achieving a so-called soft landing for the economy as they raise interest rates to battle inflation will be difficult. Cleveland Fed President Loretta Mester said Tuesday that "certainly, it hasn't slowed enough (a) to call it a recession and (b) to see that moderation in demand." She suggested that interest rates had more room to rise and that she was still looking for a clear slowdown in inflation.
"We're committed to getting inflation down," Mester said at a separate event at the Economic Club of Pittsburgh on Thursday. "We're not in a recession right now. Are the risks of recession going up? Yes"
Market participants expect that an economic slowdown would prompt the Fed to slow interest rate hikes, with fed-funds futures markets pricing in rate cuts in 2023.
"It's worth noting that stock markets rallied on the signs of stronger-than-expected growth. This is significant because recently they've been rallying on signs of weaker growth, which would mean that the Fed was likely to stop hiking rates and start cutting early on," said Marshall Gittler, head of investment research at BDSwiss Holding Ltd..
Investors continue to wade through a flood of corporate earnings reports. Fast food chain Shake Shack Inc.(SHAK) shares shed 6.2% Thursday after the company reported quarterly earnings that fell short of Wall Street's expectations for revenue. Alibaba Group (9988.HK) shares rose 1.8% after its fiscal first-quarter earnings beat expectations, sending other two Chinese e-commerce giants JD.com(JD) and Pinduoduo(PDD)'s stocks higher.
Coinbase Global Inc.(COIN) shares soared 10% after the crypto exchange firm announced a partnership with BlackRock that will offer direct access to bitcoin to some of its institutional clients.
Investors continue to weigh whether a bounce that has seen the S&P 500 rise more than 13% off its 2022 low set in June will continue, or prove to be another bear-market bounce. Some analysts have seen encouraging signs in the form of broader participation in the rally by individual stocks.
Earlier, the Bank of England hiked interest rates by 50-basis-point on Thursday as it predicted U.K. inflation may hit double digits by the end of 2022, while warning that a long recession is on its way. British consumer price inflation hit a 40-year high of 9.4% in June.
Read: Why the U.S. stock rally looks more like a new bull market than a bear bounce to these analysts
Companies in focus
Hear from Carl Icahn at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The legendary investor will reveal his view on this year's wild market ride.
(END) Dow Jones Newswires
August 04, 2022 16:41 ET (20:41 GMT)
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