The S&P 500 and the Nasdaq fell on Wednesday as a slew of weak economic data deepened worries that the rapid interest rate hikes by the Federal Reserve may tip the U.S. economy into a recession.
Nvidia Corp (NVDA.O) was among top drags on the S&P 500, down 2.9%, after Alphabet Inc’s (GOOGL.O) Google said the supercomputers it uses to train its artificial intelligence models were faster and more power-efficient than comparable systems from the chipmaker.
On the data front, the ADP National Employment report showed U.S. private employers hired far fewer workers than expected in March, adding to signs of a cooling labor market, following Tuesday’s weak job openings data.
Further, the Institute for Supply Management’s survey showed the services sector slowed more than expected last month on cooling demand, while a measure of prices paid by services businesses fell to a near three-year low.
Focus will now be on the monthly non-farm payrolls, a more comprehensive employment report, due on Friday for further clues on the state of the labor market.
“If we paint a broader picture of what’s happening in the economy right now, we’re looking at weakening labor data, inflation that is falling but is still stubbornly high,” said Brian Klimke, investment director at Cetera Investment Management.
“So it does appear that we are headed toward a recession.”
With growing concerns about a worsening economic outlook following the recent turmoil in the banking sector, market expectations have shifted in favor of the U.S. central bank hitting the brakes on its interest rate hikes.
Traders’ bets of a pause by the Fed in May stood at 60.5%, while odds of a 25-basis point interest rate hike was at 39.5%, according to CME Group’s Fedwatch tool.
Keeping the Dow Jones afloat, Johnson & Johnson (JNJ.N) gained 3.3% after its $8.9-billion offer to settle talc-related lawsuits gained support of thousands of claimants, easing an overhang on its plans to list consumer health unit Kenvue.
At 11:39 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 80.99 points, or 0.24%, at 33,483.37, the S&P 500 (.SPX) was down 13.72 points, or 0.33%, at 4,086.88, and the Nasdaq Composite (.IXIC) was down 145.17 points, or 1.20%, at 11,981.16.
The benchmark S&P 500 and the tech-heavy Nasdaq are now on track for their first weekly declines in four in the holiday-shortened week.
Declining issues outnumbered advancers for a 2.22-to-1 ratio on the NYSE and a 2.36-to-1 ratio on the Nasdaq.
The S&P index recorded eight new 52-week highs and two new lows, while the Nasdaq recorded 23 new highs and 185 new lows.