Wall St plunges as tight labor market fuels Fed concerns

  • Procter & Gamble tumbles after commodity price pressure warning
  • Netflix down ahead of quarterly results
  • Dow down 0.36%, S&P 500 down 0.35%, Nasdaq down 0.55%

NEW YORK, Jan 19 (Reuters) – U.S. stock indexes fell on Thursday after data indicating a tight labor market fueled concerns that the Federal Reserve will maintain its aggressive rate hike path and lead to a policy error that could tip the economy into a recession.

A Labor Department report showed weekly jobless claims were below expectations, indicating that the labor market remains strong despite the Fed’s efforts to stifle demand for workers.

Expectations that the central bank would further reduce the scale of its interest rate hikes when it announces policy next month were not changed by the report. Investors have been looking for signs of weakness in the labor market as a key ingredient for the Fed to slow its policy tightening measures.

Unemployment benefit claims

Other data showed manufacturing activity in the Mid-Atlantic region subdued again in January, while Commerce Department data confirmed the housing market slump persisted.

“You have two diametrically opposed data — one is weakening spending data and things like that and the other is still pretty robust jobs data,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville. , Virginia.

“It’s kind of like a seesaw, you don’t know what the Fed is going to do in terms of raising rates, how much, keeping them stable, so are they going to overdo it?”

The Dow Jones Industrial Average (.DJI) fell 119.6 points, or 0.36%, to 33,177.36, the S&P 500 (.SPX) fell 13.93 points, or 0.35%, to 3,914.93 and the Nasdaq Composite (.IXIC) fell 60.48 points, or 0.55%, to 10,896.53.

Recent comments from Fed officials continue to underscore the disconnect between the central bank’s view on its terminal rate and market expectations.

Boston Fed President Susan Collins echoed comments from other policymakers to bolster the case for raising interest rates beyond 5%. Fed Vice Chairman Lael Brainard said the Fed is still “probing” the level of interest rates that will be needed to control inflation.

Markets, however, see the terminal rate at 4.89% by June and have largely priced in a 25 basis point rate hike from the US central bank in February, with rate cuts in the second. half of the year. .

The S&P 500 and the Dow were poised to fall for a third consecutive session, their longest streak of declines in a month.

On the earnings front, Procter & Gamble Co (PG.N) fell 1.04% after warning that the cost of raw materials would put pressure on profits, despite raising its sales forecast for the year whole.

Analysts now expect year-over-year earnings for S&P 500 companies to decline 2.8% in the fourth quarter, Refinitiv data shows, from a 1.6% decline at the start. of the year.

Netflix Inc (NFLX.O) fell 0.94% ahead of its expected results after the closing bell on Thursday, in which it is expected to report its weakest quarterly revenue growth.

Falling issues outnumbered rising ones on the NYSE by a ratio of 1.50 to 1; on the Nasdaq, a ratio of 1.63 to 1 favored the decliners.

The S&P 500 posted a new 52-week high and two new lows; the Nasdaq Composite recorded 37 new highs and 31 new lows.

(Reporting by Chuck Mikolajczak, editing by Deepa Babington)

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