The major U.S. index futures are currently pointing to a modestly lower open on Thursday, with stocks likely to move to the downside after ending the previous session narrowly mixed.
The futures edged lower following the release of a report from payroll processor ADP showing private sector employment in the U.S. increased by much less than expected in the month of August.
ADP said private sector employment rose by 99,000 jobs in August after climbing by a downwardly revised 111,000 jobs in July.
Economists had expected private sector employment to jump by 145,000 jobs compared to the addition of 122,000 jobs originally reported for the previous month.
“The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” said ADP chief economist Nela Richardson. “The next indicator to watch is wage growth, which is stabilizing after a dramatic post-pandemic slowdown.”
The data is likely to add to recent concerns about the economic outlook but could also boost the chances of accelerated interest rate cuts by the Federal Reserve.
Meanwhile, the Labor Department released a separate report showing a modest decrease by first-time claims for U.S. unemployment benefits in the week ended August 31st.
Following the sell-off seen during Tuesday’s session, stocks showed a lack of direction over the course of the trading day on Wednesday. The major averages spent the day bouncing back and forth across the unchanged line.
The major averages eventually finished the day narrowly mixed. While the Dow inched up 38.04 points or 0.1 percent to 40,974.97, the S&P 500 dipped 8.86 points or 0.2 percent to 5,520.07 and the Nasdaq fell 52.00 points or 0.3 percent to 17,084.30.
The lackluster performance on Wall Street may have reflected uncertainty about the near-term outlook for the markets following the substantial volatility seen over the past couple months.
While stocks reached new record highs in mid-July, the markets experienced a significant sell-off in early August amid concerns about the economic outlook.
Stocks have subsequently shown a substantial rebound, with the Dow recently reaching a new record high, as traders expressed optimism about the Federal Reserve lowering interest rates later this month.
However, worries about the economy continue to hang over the markets following Tuesday’s disappointing readings on manufacturing activity.
The Labor Department also released a report showing a bigger than expected decrease by job openings in the U.S. in the month of July.
The Labor Department said job openings edged to 7.67 million in July from a downwardly revised 7.91 million in June.
Economists had expected jobless claims to dip to 8.10 million from the 8.18 million originally reported for the previous month.
“The report offers further evidence of cooler labor market conditions but doesn’t change our call for the Federal Reserve to begin the process of normalizing interest rates with a 25bp cut at the FOMC meeting on September 18,” said Nancy Vanden Houten, U.S. Lead Economist at Oxford Economics.
She added, “The pace of hiring ticked up slightly, but layoffs and other separations increased, suggesting some downside risk to our forecast for August job growth of 170,000.”
Most of the major sectors ended the day showing only modest moves, contributing to the lackluster performance by the broader markets.
Energy stocks saw considerable weakness on the day, however, as the price of crude oil tumbled below $70 a barrel to its lowest levels in nine months.
Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index both slid by 1.5 percent.
Gold, steel and computer hardware stocks also saw further downside, while telecom stocks moved sharply higher, driving the NYSE Arca North American Telecom Index up by 2.2 percent.