Treasury yields decreased significantly. The 10-year note’s yield decreased to 3.303%. The action followed a dismal ADP payrolls report on employment growth in the private sector.
In the meantime, amid signals of a deteriorating labour market, gold futures (GC=F) are holding at their highest level in more than a year and are very close to a record high. After rising on Monday, the price of crude oil (CL=F) dropped to a range about $80 per barrel.
Tuesday’s S&P 500 recorded a 0.6% decline as a result of additional evidence of the labour market cooling in the form of new data. According to the monthly Job vacancies and Labour Turnover Survey (JOLTS), US companies reported 9.93 million job vacancies in February, which is a considerable decrease from the over 10.5 million in January and significantly less than the 10.5 million consensus prediction.
Paul Hickey, creator of Bespoke Investments, stated in a note that “previous rollovers and drawdowns of similar magnitude in the number of job openings were associated with recessions since 2000 when JOLTS data [started]”.
Two new data releases on Wednesday indicated continued economic deterioration. According to payroll processing company ADP, private companies added 145,000 positions in March, less below the consensus projection of 210,000, indicating that employers are slowing down.
Nela Richardson, chief economist of ADP, stated that “our March payroll data is one of several signals that the economy is slowing.” Employers are slowing down after a year of aggressive hiring, and pay growth has plateaued for three months.
US service providers’ growth nevertheless slowed in March. The services activity index published by the Institute for Supply Management decreased to 51.2 from the consensus prediction of 54.4. In March, new orders decreased from 62.6 to 52.2, and prices decreased from 65.6 to 59.5. The employment rate also increased but fell to 51.3 for the month. (Readings greater than 50 typically suggest expansion.)
The U.S. economics team at Barclays stated in a note following the release that “Today’s reading may be a sign that the Fed’s hiking campaign is gaining traction against the resilient service sector, possibly in conjunction with tightening of lending conditions associated with recent banking stresses.”
At the same time, Wednesday marked the conclusion of Walmart’s (WMT) two-day investor meeting. At the meeting, the business predicted that by 2026, about 65% of stores would be automated. The announcement follows the company’s termination of hundreds of workers at online fulfilment centres. It declared that, in light of ongoing inflation, it planned to further slow recruiting. Walmart’s stock increased by 1.5%.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, stated that the inflation rate is still too high and obstinate and predicted that interest rates will rise to at least 5%, with the “real fed funds rate staying in positive territory for some time.”
Bank stock prices also declined on Wednesday, with the KBW Banks Index (BKX) falling by almost 0.5%. Western Alliance (WAL), which provided a preview of its first-quarter results that disappointed investors, had the lowest performance. Shares fell by more than 12%.
After Kerrisdale Capital, a company with a short position in AI stock, announced that it had written to the software maker’s auditor claiming a number of accounting issues, shares of C3.ai, Inc. (AI) dropped more than 15% on Wednesday. The business denied doing anything improper.
Following the U.S. Food and Drug Administration’s (FDA) approval of Inflarx NV’s monoclonal antibody for the treatment of hospitalised COVID patients, shares of InflaRx N.V. (IFRX) shot up.
Following FedEx’s (FDX) announcement that it would combine its ground, express and freight operating firms into a single entity, the delivery giant’s stock price increased 1.5% on Wednesday.