Title: Stock Market Indexes Suffer Losses on Surprising ADP Payroll Numbers
Subtitle: Concerns of Rate Hikes Mount as Labor Data Fuels Speculation
Date: [Insert Date]
The major stock market indexes experienced losses and remained near their daily lows on Thursday as unexpected developments in the June ADP payroll numbers sparked fears of potential rate hikes. The private payroll number far exceeded expectations, with a significant increase of 497,000 compared to the consensus estimate of 235,000 from Econoday. This surge marked the largest monthly increase since July 2022. However, the news appeared to unsettle investors who are now anticipating future rate hikes.
Leading the June surge in payrolls were the leisure and hospitality industries, which saw 232,000 new job openings. Robust hiring was also observed in the construction, transportation, and utilities sectors. On the other hand, initial jobless claims for the week ended July 1 came in at 248,000, slightly higher than the expected 245,000 and the revised figure of 236,000 from the previous week. Additionally, the May job openings tallyed a lower 9.824 million, falling short of the Econoday estimate of 9.9 million.
The impact of the ADP payroll numbers was felt in the bond market, as the 10-year Treasury yield rose 9 basis points to 4.04%. This is the first time the yield has surpassed the 4% mark since March. According to the CME FedWatch Tool, the likelihood of a quarter-point rate hike at the July 26 Federal Reserve meeting now stands at over 90%, indicating an increase compared to the previous day.
These labor data releases have further solidified the belief among investors that the Federal Reserve will proceed with rate hikes in the upcoming meetings, possibly extending beyond July. The CME FedWatch Tool now suggests a more than 60% chance of an additional quarter-point rate hike to take place at the September Fed meeting.
Investors are now eagerly awaiting the June employment report, scheduled for release on Friday at 8:30 a.m. ET. The nonfarm payrolls estimate for June sits at a modest 213,000 rise, significantly lower than the 339,000 reported in May. Similarly, private payrolls are projected to increase by 199,000, compared to 283,000 in the previous month.
In other economic news, the June Institute for Supply Management (ISM) services index rose to 53.9, surpassing the forecasted figure of 50.8. A reading above 50 indicates an expanding services economy, while a reading below 50 suggests contraction.
On the stock market front, all major indexes experienced losses of over 1%. The Nasdaq dropped 1.4% during the noon hour of trading, followed by the Dow Jones Industrial Average, which fell 1.3%, and the S&P 500, which shed 1.1%. The small-cap Russell 2000 fared even worse, sliding by 2.3%. The Nasdaq 100-tracking Invesco QQQ Trust ETF (QQQ) dropped 1.3%.
Shares of Meta Platforms, the parent company of Facebook and Instagram, slipped 0.2% after launching its Twitter rival product called Threads on Wednesday evening, despite gaining 10 million sign-ups. Global-e Online, an IBD 50 stock, saw its shares rise by 1.1% to an 18-month high after Piper Sandler raised its price target. However, fellow IBD 50 stock, Free market, experienced a 7.8% sell-off in heavy volume, erasing yesterday’s gains. Dow Jones stock American Express tumbled by 3% following a downgrade by Baird.
Meanwhile, sports betting and media company Genius Sports gapped up by over 18% after announcing an extension of its partnership with the National Football League. Healthy food restaurant chain Sweetgreen surged over 13% after receiving an upgrade by BofA Securities. Neat Dr Pepper rose by 1.9% after being upgraded by Morgan Stanley, while HubSpot tumbled by 2.8% after being downgraded by Piper Sandler.
Overall, the stock market faced volatility and uncertainty due to the surprising ADP payroll numbers and the looming possibility of rate hikes. Investors are closely monitoring the June employment report and future economic indicators for further insights into market trends.
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