The S&P 500 and the Nasdaq slipped on Wednesday as weaker-than-expected private payrolls data for March deepened worries that the rapid interest rate hikes by the Federal Reserve may tip the U.S. economy into a recession.
The ADP National Employment report showed U.S. private employment rose by 145,000 jobs last month, compared with economists’ projections of an increase of 200,000 jobs, adding to recent signs of a cooling economy.
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 shot up to 60.8%, while odds of a 25-basis point interest rate hike fell to 39.2%, according to CME Group’s Fedwatch tool.
Major technology and growth stocks such as Meta Platforms Inc (META.O), Tesla Inc (TSLA.O) and Amazon.com Inc (AMZN.O) slipped between 0.3% and 1.4% in early trade.
Nvidia Corp (NVDA.O) was among top drags on the S&P 500, down 2.2%, 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.
Defensive stocks such as healthcare (.SPXHC), utilities (.SPLRCU) and consumer staples (.SPLRCS) were in the green among major S&P 500 sectors.
Keeping the Dow Jones afloat was a 3.2% gain in Johnson & Johnson (JNJ.N) after the company’s $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.
All eyes are now on the non-farm payrolls data for March, a more comprehensive employment report, that is due on Friday for further clues on the state of the labor market.
“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,” said Sam Stovall, chief investment strategist of CFRA Research in New York.
“But at the same time, I think investors are closely watching to make sure that we don’t fall into a deep recession.”
A report on non-manufacturing activity in March from the Institute for Supply Management is expected later on Wednesday.
At 9:38 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 57.17 points, or 0.17%, at 33,459.55, the S&P 500 (.SPX) was down 6.16 points, or 0.15%, at 4,094.44, and the Nasdaq Composite (.IXIC) was down 61.98 points, or 0.51%, at 12,064.35.
Both the benchmark S&P 500 and the tech-heavy Nasdaq (.IXIC) are now on track for their first weekly declines in four in the holiday-shortened week.
FedEx Corp (FDX.N) rose 3.6% as the freight bellwether firm said 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.