After earlier drifts in Tuesday trading, U.S. stocks lost ground as investors weighed new declines in factory orders, fresh data hinting at a softening labor market ahead of Friday’s jobs report — and what that all means for interest rates.
How stocks are trading
- The S&P 500 SPX, -0.47% dropped 11 points, or 0.2%, to 4,113
- The Dow Jones Industrial Average DJIA, -0.55% lost 136 points, or 0.4%, to 33,465
- The Nasdaq Composite COMP, -0.45% eased 28 points, or 0.2%, to 12,161
What’s driving markets
After initial calm in the premarket, investors are gauging more signs of a slowing economy on Tuesday.
The number of 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.
Now a recent winning streak seems to be fading for the S&P 500. If the S&P 500 stays in the green by the end of Tuesday’s trading, that would be a five-day winning streak for the index and the longest so far in 2023.
The S&P 500 sits at a seven-week high, up 7.4% so far this year, after traders absorbed the prospect of an economic slowdown in the wake of tremors in the banking sector and tighter credit conditions but preferred to celebrate the lower interest rates that may result.
While Silicon Valley Bank and Signature Bank shuttered nearly a month ago, the crisis in the banking sector is not over year, JPMorgan Chase & Co. CEO Jamie Dimon said Tuesday morning.
Still, Dimon wrote in his annual shareholder letter, “recent events are nothing like what occurred during the 2008 global financial crisis (which barely affected regional banks).”
While investors keep an eye on banks, they are weighing new dynamics in the oil markets after OPEC+ members announced surprise production cuts. That pushed oil prices CL.1, -0.29% 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 put the job opening numbers into the mix. “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.
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.
“So the question is whether U.S. equities will soon lose momentum…the breadth of the market has been quite narrow with mega caps doing the major heavy lifting of indices. This is probably as good as it gets for now in equities, as equity valuations are getting stretched as more and more signs are showing that the real-estate sector is slowing down dramatically, which will impact credit transmission in the economy,” said Saxo.
Cleveland Fed President Loretta Mester is due to make comments at 6 p.m. Eastern.
Companies in focus
- Ford Motor Co. shares were down 0.5%, 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, -22.14% shares were down by more than 23% 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, -22.89% shares were off more than 17% Tuesday morning at the market open, following the space launch company’s decision to file for chapter 11 bankruptcy protection.
