The S&P 500 and Nasdaq both declined on Wednesday due to weaker-than-expected private payroll data for March, which is fueling concerns that rapid interest rate hikes by the Federal Reserve may cause a recession in the United States economy. The ADP National Employment Report showed an increase of only 145,000 jobs last month, which is less than the expected increase of 200,000 jobs. This adds to recent indications of an economy that is cooling off. With concerns about a worsening economic outlook due to recent turmoil in the banking sector, market expectations are now in favor of the central bank hitting the brakes on its interest rate hikes.
Many major technology and growth stocks also declined, including Meta Platforms Inc, Tesla Inc, and Amazon.com Inc. Their losses ranged from 0.3% to 1.4% in early trading. Nvidia Corp, one of the top drags on the S&P 500, also fell 2.2% after Google said the supercomputers it uses to train its artificial intelligence models were faster and more power-efficient than comparable systems from the chipmaker.
Meanwhile, healthcare, utilities, and consumer staples were in the green among major S&P 500 sectors. Johnson & Johnson, a defensive stock, gained 3.2% after its $8.9-billion offer to settle talc-related lawsuits gained support from thousands of claimants, easing an overhang on its plans to list consumer health unit Kenvue.
The non-farm payrolls data for March, a more comprehensive employment report, is due on Friday for further clues on the state of the labor market. Sam Stovall, chief investment strategist of CFRA Research in New York, said that "the Street is realizing that with slower ADP payrolls and the possibility that we get an undercut in Friday's payroll numbers, the economy is indeed slowing, and the Fed will only need to make one more rate hike, if any."
At 9:38 a.m. ET, the Dow Jones Industrial Average was up 57.17 points, or 0.17%, at 33,459.55, the S&P 500 was down 6.16 points, or 0.15%, at 4,094.44, and the Nasdaq Composite was down 61.98 points, or 0.51%, at 12,064.35. The benchmark S&P 500 and the tech-heavy Nasdaq are both on track for their first weekly declines in four in the holiday-shortened week.
FedEx Corp also rose 3.6% as the freight bellwether firm announced that it will fold its operating divisions into one organization as it steps up efforts to cut costs and increase efficiency. Declining issues outnumbered advancers for a 2.10-to-1 ratio on the NYSE and a 2.02-to-1 ratio on the Nasdaq. The S&P index recorded four new 52-week highs and one new low, while the Nasdaq recorded 17 new highs and 85 new lows.
Investors are now closely watching the economic indicators to make sure the US economy doesn't fall into a deep recession. The report on non-manufacturing activity in March from the Institute for Supply Management is also expected later on Wednesday.
