S&P 500, Nasdaq Edge up After Recent Weakness; Dow Down
The S&P 500 and Nasdaq edged higher on Wednesday, a day after a sell-off, as the latest economic data showed U.S. private payrolls increased less than expected in September.
The Dow was down slightly. Consumer discretionary led sector gains on the S&P 500.
The ADP National Employment Report helped to ease longer-dated U.S. Treasury yields off 16-year highs, but concerns about rising interest rates and the likelihood that the Federal Reserve may need to keep rates higher for longer remained a focus for stock investors.
Other data showed new orders for U.S.-made goods increased more than expected in August. Friday’s jobs report for September is the week’s key economic news.
“This September we saw a shift in both strategist and investor belief,” said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.
“It seems like it finally sunk in that interest rates are going to remain higher for longer, and that the idea that the Fed is going to cut rates any time soon is fictional.”
The Dow Jones Industrial Average fell 40.16 points, or 0.12%, to 32,962.22, the S&P 500 gained 9.19 points, or 0.22%, at 4,238.64 and the Nasdaq Composite added 96.60 points, or 0.74%, at 13,156.07.
After recent weakness, investors were keeping an eye on the 4,200 level on the S&P 500 as the next level of support.
“On a technical basis, we’re probably a little bit oversold,” Pursche said.
Several mega-cap shares including Amazon.com were higher on the day.
Ford Motor was among the day’s decliners, with the stock falling 1.3% even as the automaker posted a near 8% rise in U.S. auto sales for the third quarter.
Declining issues outnumbered advancers on the NYSE by a 1.05-to-1 ratio; on Nasdaq, a 1.02-to-1 ratio favored decliners.
The S&P 500 posted one new 52-week highs and 40 new lows; the Nasdaq Composite recorded 13 new highs and 362 new lows.
A rout in government bond markets deepened on Wednesday with benchmark U.S. yields hitting fresh 16-year highs as investors bet that persistently high interest rates will slow world growth and dampen the appetite for riskier assets.
Treasury yields later receded on a cooler-than-expected U.S. private payrolls report that helped stocks on Wall Street rebound from Tuesday’s sharp sell-off.
Growth concerns weighed on crude oil and gold prices, and European equities edged lower for a third day as retailer shares fell on a consumer spending pullback.
The day’s rally in bonds, whose price is inverse to yield, was likely short-lived, with the September unemployment report on Friday now the market’s next focus, said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
“The sell-off has been really dramatic. It’s been rapid. It’s been huge,” Rupert said. “The market was so over-sold that it was looking for a catalyst to rally on and found it in ADP.”
Rupert referred to the ADP National Employment Report that showed U.S. private payrolls rose by 89,000 jobs in September, the smallest gain since January 2021.
The yield on 10-year Treasury notes touched 4.884%, a fresh 16-year high, while 30-year Treasury yields rose above 5% for the first time since August 2007. [US/]
“ADP is the canary in the coal mine that things are slowing,” said Rhys Williams, chief strategist at Sprouting Rock Asset Management in Bryn Mawr, Pennsylvania. “The upcoming job reports are going to be less robust than the previous few months.”
The market ignored a survey from the Institute for Supply Management (ISM) that showed the U.S. services sector slowing in September as new orders fell to a nine-month low. But inflation remained elevated and employment slowed only gradually.
The economy’s resilience, 18 months after the Federal Reserve started raising interest rates to cool demand, suggests that monetary policy could remain tight for some time.