Wall Street falls as labor market resilience spurs rate hike fears

  • Procter & Gamble shares fall, warns of commodity cost pressures
  • Netflix falls ahead of quarterly results
  • Index down: Dow 0.68%, S&P 0.75%, Nasdaq 1.00%

Jan 19 (Reuters) – U.S. stock indexes fell on Thursday after data showing a tight labor market stoked fears the Federal Reserve would continue its aggressive rate-hiking cycle that could tip the economy into recession.

A report from the Labor Department showed that weekly jobless claims in the United States unexpectedly fell, underscoring the labor market’s resilience in a high-interest-rate environment.

The report did not change expectations that the Fed will further scale back its rate hikes next month, sparked by a decline in retail sales in December and a pullback in inflation in the previous session.

A separate survey of goods producers on Thursday showed manufacturing activity in the Mid-Atlantic region slowed again in January, while data from the Commerce Department confirmed continued slump in the housing market.

“One of the pieces of data that remains a problem for the Fed is the tight labor market,” said Art Hogan, chief market strategist at B. Riley in New York.

“There has been little sign of any slack in the labor market, which is one reason why the Fed has been leaning toward keeping rates higher for longer.”

Comments from Fed officials continued to highlight the discrepancy between the central bank’s estimates for its terminal rate and market expectations.

Boston Fed President Susan Collins joined policymakers in backing raising interest rates above 5%.

On the other hand, the market expects the terminal interest rate to reach 4.89% by June, and has digested the expectation that the US central bank will raise interest rates by 25 basis points in February. .

The S&P 500 (.SPX) and Dow Jones Industrial Average (.DJI) are now down for the third straight day.

The challenging economic environment has taken a toll on U.S. businesses, with companies including Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) announcing plans to cut thousands of jobs.

Shares of both companies fell about 2%, the biggest drag on the benchmark S&P 500 and Nasdaq (.IXIC) indexes.

Industrials (.SPLRCI) and consumer discretionary (.SPLRCD) led the decline in the S&P 500, down 1.5 percent and 1.7 percent, respectively.

Procter & Gamble (PG.N ) fell 0.8 percent after warning that commodity costs were weighing on profits, although it raised its full-year sales forecast.

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

At 12:21 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 224.90 points, or 0.68%, to 33,072.06, the S&P 500 (.SPX) was down 29.38 points, or 0.75%, to 3,899.48, and the Nasdaq The Composite Index (. .IXIC) fell 109.91 points, or 1.00 percent, to 10,847.10.

Netflix Inc (NFLX.O) is expected to report its slowest quarterly revenue growth later on Thursday. The company’s shares fell 1.6%.

Declining issues outnumbered advancing ones by a ratio of 2.09 to 1 on the New York Stock Exchange and 2.10 to 1 on the Nasdaq.

The S&P posted one new 52-week high and two new lows, while the Nasdaq posted 28 new highs and 27 new lows.

Reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru; Additional reporting by Shubham Batra; Editing by Shounak Dasgupta

Our Standards: The Thomson Reuters Trust Principles.

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