U.S. Stocks Under Pressure As Strong Jobs Data Adds To Interest Rate Worries

Stocks have moved sharply lower in morning trading on Thursday, largely offsetting the upward move seen over the course of the previous session. The major averages have all shown notable moves to the downside on the day.

Currently, the major averages are off their lows of the session but still firmly negative. The Dow is down 277.44 points or 0.8 percent at 32,992.33, the Nasdaq is down 99.04 points or 1.0 percent at 10,359.72 and the S&P 500 is down 32.78 points or 0.9 percent at 3,820.19.

The weakness on Wall Street comes following the release of a report from payroll processor ADP showing private sector employment in the U.S. jumped by much more than expected in the month of December.

ADP said private sector employment shot up by 235,000 jobs in December after surging by an upwardly revised 182,000 jobs in November.

Economists had expected employment to jump by about 150,000 jobs compared to the addition of 127,000 jobs originally reported for the previous month.

While the stronger than expected job growth points to continued strength in the labor market, the data has added to concerns about the outlook for interest rates.

Traders worry continued labor market tightness could encourage the Federal Reserve to continue aggressively raising interest rates in the coming months.

The Fed released the minutes of its latest monetary policy meeting on Wednesday, indicating the central bank plans to continue raising interest rates and keep rates at a restrictive level for “some time.”

On Friday, the Labor Department is scheduled to release its more closely watched employment report for the month of December.

Economists currently expect employment to jump by 200,000 jobs in December after surging by 263,000 jobs in November, while the unemployment rate is expected to hold at 3.7 percent.

With the monthly jobs report looming, the Labor Department released a report this morning showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended December 31st.

The report said initial jobless claims slipped to 204,000, a decrease of 19,000 from the previous week’s revised level of 223,000. Economists had expected jobless claims to come in unchanged compared to the 225,000 originally reported for the previous week.

A separate report released by the Commerce Department showed the U.S. trade deficit narrowed significantly more than expected in the month of November.

Gold stocks are showing a substantial pullback after moving sharply higher over the two previous sessions, resulting in a 2.6 percent slump by the NYSE Arca Gold Bugs Index. The index is pulling back off its best closing level in almost seven months.

The sharp pullback by gold stocks comes as the price of the precious metal is giving back ground, with gold for February delivery falling $25.20 to $1,833.80 an ounce.

Considerable weakness is also visible among interest rate-sensitive commercial real estate stocks, as reflected by the 2.5 percent drop by the Dow Jones U.S. Real Estate Index.

Software stocks have shown a significant move to the downside, dragging the Dow Jones U.S. Software Index down by 2.3 percent to its lowest intraday level in almost two months.

Utilities, chemical and transportation stocks are also seeing notable weakness, while energy stocks are bucking the downtrend amid a rebound by the price of crude oil.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index rose by 0.4 percent, while Hong Kong’s Hang Seng Index jumped by 1.3 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the U.K.’s FTSE 100 Index is up by 0.7 percent, the French CAC 40 Index is down by 0.1 percent and the German DAX Index is down by 0.3 percent.

In the bond market, treasuries are giving back ground after moving notably higher over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 5.8 basis points at 3.767 percent.

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