Stocks slipped on Wall Street Monday as investors anticipate a series of key reports on the labor market that might provide more insight into the Federal Reserve’s thinking about interest rates.
The S&P 500 dropped 0.9%, ending a month of solid gains that reached its highest level in more than a year on Friday. The Dow Jones Industrial Average fell 150 points, or 0.4%, to 36,097 as of 11:20 a.m. Eastern, while the Nasdaq Composite fell 1.5%.
Yields on U.S. Treasurys saw a slight rise, putting some downward pressure on stocks. The yield on the 10-year Treasury, which influences mortgage rates, rose to 4.29%, up from 4.21%.
Tech stocks were among the biggest laggards on the market, with losses seen in Microsoft (2.6%) and Apple (1.8%). Spotify, however, surged 7% after announcing its third round of layoffs this year. Uber was also up, gaining 5.6% following its inclusion in the S&P 500 Index.
Alaska Air Group struggled, with shares down 15.6%, after the company said it was buying Hawaiian Airlines in a $1.9 billion deal. The tie-up could test the Biden Administration’s stance on airline consolidation.
Oil prices were lower, with U.S. crude falling 0.3%, providing some welcome relief from inflation. Meanwhile, European and Asian stocks were mixed.
The positive mood that has surrounded Wall Street in the last week and throughout November is due to easing inflation, giving the Federal Reserve a chance to pause raising interest rates. Investors are also banking on the economy to remain strong enough to avoid a recession.
This week brings several key updates on the economy, starting with Monday’s Institute for Supply Management’s November report on the services sector, which accounts for the majority of the nation’s jobs. The report will no doubt provide invaluable insights into consumer spending and jobs prospects.
Additionally, Tuesday’s job opening report from the government and Thursday’s weekly report on applications for unemployment benefits will give investors a chance to get a broader picture of the employment landscape.
The most important of the lot, however, is Friday’s monthly jobs report for November, which analysts polled by FactSet predict will show that U.S. employers added 175,000 jobs last month. The unemployment rate is forecasted to remain steady at 3.9%.
Amidst these reports, the Federal Reserve is expected to keep interest rates steady into early 2024, when the central bank could begin to cut rates back from two-decade highs. The Fed’s next decision on rates will follow the close of their next two-day meeting on Dec. 13.
Wall Street’s optimism stems from a combination of promising economic trends. The labor market has remained resilient and strong despite the Fed raising interest rates sharply to combat inflation, while inflation has softened since the mid of 2022. The key reports this week could provide greater clarity on just how effective the Fed’s strategy has been.
