U.S. stock losses are deepening Tuesday as investors weigh new declines in factory orders, fresh data hinting at a softening labor market ahead of Friday’s jobs report, and what that means for recession fears and interest rates.
How stocks are trading
- The S&P 500 SPX, -0.47% dropped 32 points, or 0.8%, to 4,091
- The Dow Jones Industrial Average DJIA, -0.59% lost 298 points, or 0.8%, to 33,302
- The Nasdaq Composite COMP, -0.40% eased 81 points, or 0.6%, to 12,107
What’s driving markets
Early hopes to extend a winning streak are fading fast as investors weigh more signs of a slowing economy on Tuesday.
The number of U.S. job openings in February fell to a 21-month low, according to Labor Department data. There were 9.9 million openings, fewer than analyst expectations for 10.5 million openings and it’s down from 10.6 million job openings in January.
Meanwhile, orders for manufactured goods fell for the third time in the past four months. The 0.7% drop in February was slightly larger than the 0.6% expectation from economists surveyed by The Wall Street Journal.
Trading at the start of the second quarter is being dragged by numbers indicating weaker economic growth in March, said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management. “Weaker growth is going to mean weaker profits , and that’s going to be tough for equities to navigate,” he said.
It’s been nearly a month since Silicon Valley Bank and Signature Bank suddenly shuttered. There were initial shockwaves and market rebounds, but as the dust continues settling, Miskin said there’s “struggle with a lack of fundamental support to keep the rally going.”
So it’s back to the big picture worries that hovered before the bank failures. “Broader recession risk is creeping into the mind of the market, more so than if there was a poorly run bank here or there,” he said.
Miskin sees the banking worries in the “rear view mirror, ” but not Jamie Dimon.
In his annual shareholder letter Tuesday, the JPMorgan Chase & Co. CEO said the banking sector crisis is not done. Still, Dimon emphasized “recent events are nothing like what occurred during the 2008 global financial crisis (which barely affected regional banks).”
On Tuesday afternoon, the SPDR S&P Regional Banking ETF KRE, -2.93% was down more than 3%.
The current economy is “pretty good,” but Dimon also wrote in his letter “[We’re] preparing for what may be a new and uncertain future.”
While investors keep an eye on banks, they are weighing new dynamics in the oil markets after OPEC+ members announced surprise production cuts which pushed oil prices CL.1, -0.14% higher on Monday, and gains are so far extending into Tuesday’s oil futures.
Higher fuel prices could push other prices higher and force central banks to raise interest rates for longer, but that could be counteracted by news of weakening activity in the U.S. manufacturing sector.
“For investors keen to see an end to the monetary tightening environment…U.S. manufacturing activity dipped to its lowest level in almost three years in March, with new orders slumping amid the possibility of further falls if the expected credit tightening from banks washes through,” said Stephen Hunter, head of markets at Interactive Investor.
Now throw the February job opening numbers into the mix released earlier Tuesday. “The Federal Reserve might see this as a sign that the mismatch between supply and demand of labor is slowly resolving, meaning less potential inflation pressure,” said Mark Hamrick, senior economic analyst at Bankrate.
More clues on Cleveland Fed President Loretta Mester is due to make comments at 6 p.m. Mester is not a voting member of the Fed’s benchmark interest rate committee.
A week shortened for the Good Friday holiday, which will close the U.S. stock market on April 7, is encouraging investors to sit on their hands, but the March nonfarm payrolls report will still be published on that day, and traders will be wary of being badly positioned and not able to immediately react.
Next week also sees the start of the first-quarter corporate-earnings season, possibly another reason for caution.
Further dissuading bullish bets is that the S&P 500 is getting near the top of the 3,800 to 4,200 trading range within which it has vacillated for more than five months.
Companies in focus
- Ford Motor Co. shares were down 1%, after the car maker announced first quarter results. Ford had a 10.1% increase in U.S. vehicle sales during the first quarter, selling 475,906 units.
- AMC Entertainment Holdings Inc. AMC, -22.42% shares were down by more than 21% after the movie-theater operator and focus of meme-stock traders said it had agreed to settlement terms on shareholder litigation related to a stock conversion. The deal could result in an equity raise as large as $16 billion, one analyst said.
- Virgin Orbit Holdings Inc. VORB, -24.54% shares were off 22% Tuesday afternoon at the market open, following the space launch company’s decision to file for chapter 11 bankruptcy protection.
