The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the sharp pullback seen over the course of the previous session.
Traders may be reluctant to make significant moves amid uncertainty about the outlook for interest rates following the release of mixed U.S. jobs data.
While payroll processor ADP released a report showing private sector job growth slowed more than expected in December, the Labor Department released a report showing weekly jobless claims unexpectedly fell to their lowest level in almost eleven months.
ADP said private sector employment rose by 122,000 jobs in December after climbing by 146,000 jobs in November. Economists had expected private sector employment to grow by 140,000 jobs.
The report said hiring slowed in several industries, while employment in the manufacturing sector shrank for the third straight month.
“The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains,” said ADP Chief Economist Nela Richardson.
Meanwhile, the Labor Department released a report unexpectedly showing another modest decrease by first-time claims for U.S. unemployment benefits in the week ended January 4th.
The report said initial jobless claims slipped to 201,000, a decrease of 10,000 from the previous week’s unrevised level of 211,000. Economists had expected jobless claims to rise to 218,000.
With the unexpected dip, jobless claims fell to their lowest level since hitting 200,000 in the week ended February 17, 2004.
The Labor Department is scheduled to release its closely watched monthly jobs report on Friday, potentially providing additional clarity about the strength of the labor market.
Later in the day, the Federal Reserve is due to release the minutes of its latest monetary policy meeting, which may also provide clues about the outlook for interest rates.
Stocks moved higher early in the session on Tuesday but pulled back sharply over the course of the trading day. The major averages all moved to the downside on the day, with the tech-heavy Nasdaq leading the way lower.
The major averages climbed off their worst levels going into the close but remained firmly in the red. The Nasdaq tumbled 375.30 points or 1.9 percent to 19,489.68, the S&P 500 slumped 66.35 points or 1.1 percent to 5,909.03 and the Dow fell 178.20 points or 0.4 percent to 42,528.36.
The sharp pullback by stocks came amid a notable increase by treasury yields, with the yield on the benchmark ten-year note surging to its highest closing level in eight months.
The jump by treasury yields, which led to concerns about the outlook for interest rates, came following the release of some upbeat U.S. economic data.
The Institute for Supply Management released a report showing its reading on U.S. service sector activity increased by more than expected in the month of December.
The ISM said its services PMI climbed to 54.1 in December from 52.1 in November, with a reading above 50 indicating growth. Economists had expected the index to rise to 53.3.
The report also said the prices index surged to 64.4 in December from 58.2 in November, climbing above 60 for the first time since January 2024. The sharp increase by the index has led to worries services inflation will remain sticky.
A separate report released by the Labor Department showed job openings in the U.S. unexpectedly increased in the month of November.
Bill Adams, Chief Economist for Comerica Bank, said the data “bolster the view that the Fed will cut rates slower this year than expected before the election.”
The weakness on Wall Street also came amid a slump by shares of Nvidia (NASDAQ:NVDA), with the AI darling and market leader plunging by 6.2 percent after reaching a record intraday high.
Shares of Tesla (NASDAQ:TSLA) also tumbled by 4.0 percent after Bank of America downgraded its rating on the electric vehicle maker’s stock to Neutral from Buy.
Software, semiconductor and computer hardware stocks saw significant weakness on the day, contributing to the steep drop by the tech-heavy Nasdaq.
Considerable weakness was also visible among retail sales stocks, as reflected by the 1.4 percent loss posted by the Dow Jones U.S. Retail Index.
Housing, brokerage and telecom stocks also showed notable moves to the upside, while airline, oil and gold stocks bucked the downward trend.
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