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S&P 500 Slips As Investors Weigh Mixed Signals on U.S. Economy

Published 04/08/2021, 19:36
Updated 04/08/2021, 19:36
© Reuters.

© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 slipped Wednesday, as investors weighed up mixed economic data following evidence of a weaker labor market but stronger services activity just as the Federal Reserve looks to stick with plans to tightened monetary policy.

The S&P 500 fell 0.3%, the NASDAQ Composite was up 0.2%, and the Dow Jones Industrial Average slipped 0.8%, or 293 points.

The ISM services index posted rebounded to a reading of 64.1 in July, above the previous peak of 64 set in May.

“The reopening of the service sector across the country continues to support strong readings in these diffusion indexes. The June decline created concern that the reopening had run into capacity constraints which would limit further upside. The July bounce puts those concerns at ease,” Jefferies (NYSE:JEF) said in a note.

In the labor market, however, there appears more reason to be concerned as private payrolls fell well short of expectations. This morning, ADP (NASDAQ:ADP) reported that private-sector employment rose by 330,000 in July, less than half the 690,000 rise expected.

The jobs front has come added scrutiny in recently, as the Federal Reserve said the job gains still have a way to go to reach pandemic levels.

While the jobs market still has a way to go to recover to pre-pandemic levels, Federal Reserve Vice Chairman Richard Clarida said Wednesday the central bank could being hiking interest rates again in 2023. “Given this outlook and so long as inflation expectations remain well anchored at the 2% longer-run goal … commencing policy normalization in 2023 would, under these conditions, be entirely consistent with our new flexible average inflation targeting framework,” Clarida told the Peterson Institute for International Economics in a virtual appearance.

The weaker-than-expected jobs data came just days ahead of nonfarm payrolls data due Friday, and weighed on the cyclical stocks including energy and industrials.

Energy was the worst performing sector, down more than 2% following a slip in oil prices as data showed weekly U.S. crude inventories unexpectedly increased last week.

Stockpiles increased 3.6 million barrels during the week ended July 30, confounding expectations for a draw of 3.1-million barrels.

A wave of mostly underwhelming quarterly results, meanwhile, added to pressure on stocks as Kraft Heinz and General Motors Company (NYSE:GM) slumped.

Kraft Heinz Co (NASDAQ:KHC)reported better-than-expected second-quarter results, though sales slipped year-on-year. Its share price fell 3%.General Motors reported mixed quarterly results as earnings missed, but revenue beat expectations. The automaker raised guidance that fell short of Wall Street estimates, sending its shares more than 5% lower.

The jump in cases brought on by the delta variant of coronavirus has also prompted some investor caution as some companies return toward implanting restrictions from last year.

“Some companies such as Target (NYSE:TGT) are adopting a mask mandate for employees, and others including Tyson Foods (NYSE:TSN), Microsoft (NASDAQ:MSFT) and The Walt Disney Company (NYSE:DIS) are implementing vaccine requirements. NYC, meanwhile, will now require proof of vaccination for entry into restaurants, gyms and leisure events, such as movie theaters,” Stifel said in a note.

In other news, Robinhood Markets Inc (NASDAQ:HOOD) jumped 52% as that trading of its options got underway for the first time.

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