NASDAQ 100, Dow Jones, S&P 500: Caution Prevails as Robust Jobs Data Raises Rate Hike Concerns

Highlights

• Private sector jobs surge by 497,000 in June, exceeding expectations.
• Traders anticipate potential tightening measures as 10-year Treasury yield crosses 4%.
• Resilient labor market shown as initial jobless claims remain within expectations, trade deficit falls.

Overview

Major US stock indexes opened lower on Thursday as better-than-expected jobs data raised concerns about the state of the economy and the path of interest rates. Private sector jobs saw a significant increase of 497,000 in June, marking the largest monthly gain since July 2022. The data from ADP surpassed expectations, which projected a gain of 220,000 jobs. However, the reliability of ADP data is often questioned due to its volatility.

Non-Farm Payrolls on Tap

Investors are now eagerly awaiting Friday’s official June payrolls report for a more comprehensive view of the job market. Economists anticipate an addition of 240,000 non-farm payrolls last month, indicating a slowdown compared to the impressive 339,000 jobs added in May. The positive jobs data led to a rise in the 10-year Treasury yield, crossing the 4% mark, as traders anticipate potential tightening measures from the Federal Reserve.

While initial jobless claims increased to 248,000 last week, the numbers remain within expectations, signaling a resilient labor market. Continuing claims edged lower to 1.72 million, further highlighting the strength of the job market amidst the Fed’s rate-hiking campaign. Additionally, the US trade deficit fell slightly to $69 billion in May.

JetBlue, American Airlines End Partnership

In other news, JetBlue Airways announced the end of its partnership with American Airlines in the northeast US, shifting its focus to Spirit Airlines. This decision had a minor impact on JetBlue’s stock, slipping over 1%, while American Airlines saw a slight decline and Spirit Airlines gained over 2%.

As the market resumed trading after the Fourth of July holiday, the focus turned to the minutes from the June Federal Reserve policy meeting, which indicated the officials’ support for additional rate hikes in the future. Fed Chair Powell has expressed a strong commitment to achieving the 2% target, suggesting the likelihood of further hikes later this year.

Short-Term Outlook:  Tentative Ahead of NFP Data

Overall, the market opened on a cautious note, with attention on the jobs data and its implications for the economy and interest rates.