Wall Street’s main indexes fell sharply on Thursday as fresh evidence of a tight labor market and dovish comments from policymakers fueled fears of longer-than-expected interest rate hikes.
The Dow Jones Industrial Average was down 364 points, or 1.1 percent, at 32,905, the S&P 500 was down 1.1 percent and the Nasdaq was down 1.3 percent.
Most major tech stocks and other growth stocks such as Alphabet and Microsoft fell between 1% and 2.3% as U.S. Treasury yields rose after expectations of longer-term rate hikes.
Tesla rose more than 5% after December sales of Chinese-made electric vehicles fell to a five-month low, while Amazon revised up premarket earnings after announcing plans to increase layoffs.
The ADP National Employment Report showed a stronger-than-expected increase in private employment in December, while another report showed weekly jobless claims fell last week.
The reports came a day after data showed a moderate decline in job growth, with evidence that the labor market remains tight.
Thomas Hayes, chairman of Great Hill Capital LLC in New York, said: “The market wants to see more unemployment to stop the Fed hiking, and today’s report was good for the economy, but it was bad for the Fed to stop.” said Thomas Hayes. .
“This will be a knee-jerk reaction to stronger-than-expected economic data. But as the weeks go by, the truth emerges and more layoff announcements follow.
The strong labor market has raised concerns for markets due to rising borrowing costs, which would give the Federal Reserve reason to raise rates for longer than expected this year.
In the previous session, minutes after the Fed’s December meeting, Wall Street’s main indexes erased some of their gains as officials agreed to slow the pace of rate hikes to limit risks to economic growth. In recent years, the central bank has been laser-focused on the fight against inflation.
On Thursday, Kansas City Fed President Esther George and Atlanta President Rafael Bostic stressed the central bank’s priority to curb stubborn price pressures by tightening policy.
In February, traders were almost evenly split on the likelihood of a 25-basis-point and 50-bps rate hike, but rates peaked at just above 5% in June.
A broader nonfarm payrolls report will be released on Friday, which will provide additional information on labor demand and the trajectory of rate growth.
Among individual stocks, drugstore chain Walgreens Boots Alliance fell 6.7% after it posted a quarterly loss on an opioid lawsuit.
Bed Bath & Beyond lost 21.8 percent after the company said it was exploring options, including filing for bankruptcy.