Michael M. Santiago
U.S. stocks on Thursday had given up their earlier gains, with traders refraining from big moves a day ahead of the highly anticipated nonfarm payrolls report.
Investors received further economic data on inflation and the labor market.
By afternoon, the tech-heavy Nasdaq Composite (COMP.IND) was just above the flatline, higher by 0.08% to 14,029.90 points. The benchmark S&P 500 (SP500) was now down 0.05% to 4,512.49 points, while the blue-chip Dow (DJI) was lower by 0.18% to 34,828.24 points.
Of the 11 S&P sectors, seven were trading in the red, led by Real Estate and Health Care. Consumer Discretionary, Communication Services and Technology were the three gainers, while Materials was unchanged.
In a week crammed with key economic data, market participants received further indicators on Thursday. The latest Challenger report showed a more than three times increase in job cuts in August, pointing to more signs of cooling in the labor market after soft JOLTS and ADP data earlier this week. On the other hand, the number of Americans filing for jobless claims in the past week fell once again, suggesting some lingering resilience.
Meanwhile, personal spending in July came in stronger than expected, while personal income rose less than anticipated. Moreover, the headline and core personal consumption expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – held steady in July on a M/M basis and came in-line with estimates.
“The jump in spending and still-elevated rates of inflation keep the heat turned up on the Fed. But we look for growth to slow more meaningfully in the remaining months of the year. Household liquidity is draining and debt dynamics are growing less favorable. The most important source of purchasing power—income—is showing some initial signs of softening, and as demand for labor eases, wage growth should follow,” Wells Fargo’s Tim Quinlan said.
Pantheon Macro also weighed in: “We doubt that an upside surprise in the July core PCE will materially boost the chances of another rate hike, not least because it would be driven largely by a spike in the hugely volatile financial services component.”
The weak economic data this week has strengthened bets that the Fed would be able to hold off on rate hikes. The positive sentiment has fueled gains in equities, with the S&P 500 (SP500) notching a four-day win streak in the previous session.
However, the S&P (SP500) is headed for monthly losses, with the benchmark index on track to end August nearly 1.7% lower.
Treasury yields were marginally lower on Thursday. The longer-end 10-year yield (US10Y) was down 4 basis points to 4.08%, while the more rate-sensitive 2-year yield (US2Y) was down 1 basis point to 4.87%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Turning to active movers, Dollar General (DG) was the biggest percentage loser on the S&P 500 (SP500) after the discount retailer missed quarterly estimates and lowered its full year guidance.
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