Wall Street’s main indexes fell sharply on Thursday in a broad selloff after data showing a strong labor market drove up bond yields and fanned fears that the Federal Reserve will be aggressive in raising interest rates.
All 11 S&P 500 sectors were in negative territory, with energy (.SPNY) and consumer discretionary (.SPLRCD) falling the most.
Private payrolls surged far more than expected in June, data showed, suggesting that the labor market remained on solid ground despite growing risks of a recession. A separate report showed U.S. job openings dropped in May, but remained at higher levels.
A day before the monthly U.S employment report, evidence of a solid labor market stoked expectations the Fed will keep interest rates higher for longer to tame inflation that remains above its target.
“We don’t see any softening in the labor market,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “The Fed doesn’t have to worry about the jobs market. When you look at their mandate, they have no reason not to keep hiking and to keep hiking for a while.”
The Dow Jones Industrial Average (.DJI) fell 361.87 points, or 1.06%, to 33,926.77, the S&P 500 (.SPX) lost 36.73 points, or 0.83%, to 4,410.09 and the Nasdaq Composite (.IXIC) dropped 123.44 points, or 0.9%, to 13,668.21.
Treasury yields jumped following the labor market data. The benchmark 10-year yield burst above 4% while the two-year Treasury yield, which typically moves in step with interest rate expectations, hit a 16-year high.
U.S. interest rate futures saw an increased probability of another rate hike by the Federal Reserve in November, according to CME’s FedWatch.
The Fed did not hike rates at its June meeting but is widely expected to resume increases at its meeting later this month. Dallas Fed President Lorie Logan said there was a case for a rate rise at the June policy meeting.
In company news, Exxon Mobil Corp (XOM.N) shares fell 3.5% after the oil major signaled second-quarter operating profits fell sharply on lower natural gas prices and weaker oil refining margins.
JetBlue Airways (JBLU.O) shares dropped 6.5% a day after the company said it would follow a U.S. judge’s May order to end its alliance with American Airlines (AAL.O) to protect a planned purchase of Spirit Airlines.
Declining issues outnumbered advancing ones on the NYSE by a 7.93-to-1 ratio; on Nasdaq, a 4.09-to-1 ratio favored decliners.
The S&P 500 posted 3 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 21 new highs and 104 new lows.