NEW YORK: Wall Street stocks finished a volatile session modestly lower on Wednesday (Oct 5), snapping a two-day winning streak following solid US economic data.
US private employment increased by 208,000 last month as schools reopened and pandemic concerns receded, with hiring accelerating after a slowing in August, according to data from payroll firm ADP.
The report comes ahead of key government jobs release tomorrow (Oct 7), which will be scrutinised for its implications for Federal Reserve interest rate hikes.
The Dow Jones Industrial Average fell 42.45 points, or 0.14%, to 30,273.87, the S&P 500 lost 7.65 points, or 0.20%, to 3,783.28 and the Nasdaq Composite dropped 27.77 points, or 0.25%, to 11,148.64.
However, investors also sought bargains in a market that appears oversold. The forward price-to-earnings ratio is at 15.9, close to its historic mean, down from around 22 before the market's big slide this year.
“By battling back, to me that is a favourable indicator that this rally could have legs,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
“It too confirms that investors believe, traders believe, that there’s still more to go in this rally,” he said.
The Fed has been aggressively increasing interest rates to combat elevated inflation, a dynamic that has seen equity investors welcome signs of slower US growth.
The Institute for Supply Management's services index ticked down to 56.7% last month, slightly below August but well above the 50% threshold indicating growth.
Recent data showing signs of an economic slowdown, had raised hopes the US central bank might ease off its aggressive posture.
But “The economy is too strong for the Fed to pivot,” Oanda analyst Edward Moya said. “Deteriorating economic data is needed to drive down inflation and for the Fed consider a slower pace of tightening.”
Among individual companies, Twitter fell 1.3% after jumping more than 20% on Tuesday following the revival of Elon Musk's bid to acquire the social media company.
Petroleum producers Devon Energy and Occidental Petroleum jumped more than 2% after the Opec and a group of 10 other oil exporters led by Russia agreed to reduce oil output by two million barrels a day from November. – AFP, Reuters