Wall Street’s main indexes were set for a subdued open 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 labor market.
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.
“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.”
Traders’ bets of a pause by the Fed in May shot up to 62.2%, while odds of a 25-basis point interest rate hike fell to 37.8%, according to CME Group’s Fedwatch tool.
As U.S. Treasury yields dropped after the data, major technology and growth stocks such as Meta Platforms Inc (META.O), Tesla Inc (TSLA.O) and Amazon.com Inc (AMZN.O) eked out gains in premarket trade.
All eyes are now on the non-farm payrolls data for March, a more comprehensive employment report, that is due on Friday for more conclusive clues on the state of the labor market.
Final data on the S&P Global Composite and Services PMI and a report on non-manufacturing activity in March from the Institute for Supply Management, due after the opening bell, are also in focus.
At 8:27 a.m. ET, Dow e-minis were down 12 points, or 0.04%, S&P 500 e-minis were down 4.75 points, or 0.12%, and Nasdaq 100 e-minis were down 4 points, or 0.03%.
Both the benchmark S&P 500 and the tech-heavy Nasdaq (.IXIC) are now on track to notch their first weekly declines in four in the holiday-shortened week.
Wall Street’s main indexes ended lower in the previous session, with the benchmark S&P 500 (.SPX) snapping a four-day winning streak after a fall in U.S. job openings and factory orders.
Among stocks, Nvidia Corp (NVDA.O) fell 1.7% in premarket trade 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. Alphabet’s shares were up 1.5%.
Albemarle Corp (ALB.N) shed 3.2% after BofA Global Research downgraded the world’s largest lithium producer’s stock to “underperform”.
Johnson & Johnson (JNJ.N) gained 2.6% as 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.