Market Indexes Declined 1.4% After Strong Jobs Report Stoked Rate Hike Fears

Barry Adams
06 Jul, 2023
New York City

Market averages turned sharply lower after a hotter-than-expected private sector payrolls report put investors on alert. 

The S&P 500 and the Nasdaq Composite index declined more than 1% after the private sector added 497,000 net new jobs in the month. 

Travel and hospitality sector drove the hirings in June but gains were widespread including in education, transportation and construction. 

The number of job openings declined by 496,000 in June 9.8 million, according to the Job Openings and Labor Turnover Survey released by the U.S. Bureau of Labor Statistics. 

The job openings were revised down 0.3% in June to 9.8 million, from an upwardly revised 10.32 million in the previous month. 

Total separations, including voluntary quits and involuntary layoffs and discharges, rose 250,000 to 4.0 million, or 2.6% rate of quits. 

Initial jobless claims in the last week increased 12,000 to 248,000 in the week ending on July 1. Claims in the previous week were revised down by 3,000 to 236,000.   

Investors are now looking ahead to the release of non-farm payrolls data on Friday. The broader survey is expected to provide deeper insights into the labor market. 

 

Private Sector Hirings Surged In June 

Private sector employment in June accelerated more than expected after the travel & leisure industry continued to hire at a brisk pace, the latest survey from ADP showed Thursday. 

The ADP data tracks private sector jobs market and the surveys are subject to significant revisions and are often volatile. 

Total new hires in the private sector increased to 497,000 from the downwardly revised 267,000 in May, 

May payroll additions were previously estimated at 278,000. 

Leisure and hospitality sector added 232,000 net new jobs in June, driving the overall hiring in the month. 

"Consumer-facing service industries had a strong June, aligning to push job creation higher than expected," said ADP chief economist Nela Richardson. 

"But wage growth continues to ebb in these same industries, and hiring likely is cresting after a late-cycle surge," added Richardson. 

Construction, transportation and trade and education also reported notable job gains but employment in the manufacturing and information sector saw declines. 

Medium and small size businesses added staff in the month and large businesses shed employees. 

Small employers added 299,000, medium establishments expanded by 183,000 but large companies eliminated 8,000 jobs. 

Wage gains in June slowed to 6.4% after rising at 6.6% in May. 

Investors are awaiting payrolls data from the U.S. Labor Department on Friday, and non-farm payrolls, which includes private sector and government hirings, are expected to increase 235,000 after rising by 339,000 in May. 

Jobless rate is expected to inch lower to 3.6% from 3.7% in the previous month. 

 

U.S. Indexes & Yields 

The S&P 500 index traded down 1.4% to 4,385.92 and the Nasdaq Composite edged lower 1.6% to 13,580.48.  

The yield on 2-year Treasury notes increased to 4.95%, 10-year Treasury notes inched higher to 3.93% and 30-year Treasury bonds edged up to 3.95%. 

Crude oil decreased $0.93 to $72.08 a barrel and natural gas prices decreased 8 cents to $2.66 a thermal unit.