Michael M. Santiago
U.S. stocks on Tuesday had climbed off their session lows and had made an upwards push. Momentum was capped, however, after a key gauge of the labor market came in hotter-than-anticipated just a day ahead of the first Federal Reserve monetary policy decision of the year.
Market participants also awaited quarterly reports from Alphabet (GOOG) (GOOGL) and Microsoft (MSFT) after the closing bell. Both tech titans have been key drivers of the rally in technology stocks that has helped lift Wall Street.
The tech-heavy Nasdaq Composite (COMP.IND) slipped 0.40% to 15,566.09 points in mid-day trade. The S&P 500 (SP500) had moved into positive territory, up slightly by 0.02% to 4,928.78 points. The benchmark index at its session high notched a new intraday all-time peak of 4,930.05 points. The blue-chip Dow (DJI) stayed close to the flatline, having reversed course to trade 0.15% higher at 38,390.78 points.
The three major averages ended in the green in the previous session, helped by a late upward push sparked by the U.S. Treasury’s reduction in its quarterly borrowing estimates.
“The U.S. Treasury lowered its quarterly borrowing estimate for Jan-Mar from $816bn to $760bn, a larger decline than expected by the market and our U.S. rates strategists. It also announced a modest $202bn borrowing estimate for the Apr-Jun period,” Deutsche Bank’s Jim Reid said.
“These estimates suggest an improvement in the Treasury’s expectation of the budget deficit path. The market will next be watching the details of the Treasury’s coupon auction sizes in tomorrow’s refunding statement. Recall that the last quarterly refunding announcement on 1 November marked the start of the dramatic bond rally into year-end,” Reid added.
On Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) for December 2023 arrived shortly after the opening bell. Job openings climbed to 9.026M in the final month of last year, above the expected figure of 8.70M and accelerating from November’s 8.925M reading. Meanwhile, the quits rate remained steady M/M at 2.2%.
The data comes just a day before the Fed’s first monetary policy committee meeting wraps up. The central bank is widely expected to keep interest rates unchanged, but the focus will be more on chair Jerome Powell’s comments for clues about rate cuts. Market participants also trimmed their expectations for rate cuts after the data, with the CME FedWatch tool showing the odds of a 25 basis point rate cut at the Fed’s March meeting now at ~37% from about 46% the previous day.
“The December JOLTS data were broadly consistent with a U.S. labor market that is in a healthy place. Openings ticked higher in December but continue to gradually decline on trend. The layoff rate remained low, while the quit rate has returned to its pre-pandemic level in a sign that labor market turnover is no longer as robust as it was a couple of years ago,” Wells Fargo’s Sarah House said.
“Less labor market churn is helping to slow labor cost growth, while the low layoff rate is helping to keep employment growth positive. We do not think today’s JOLTS data will have a material impact on tomorrow’s FOMC meeting. We remain of the view that the FOMC will start cutting the federal funds rate at its May 1 meeting,” House added.
Treasury yields were mixed after the jobs data. The longer-end 30-year yield (US30Y) was down 5 basis points to 4.29%, while the 10-year yield (US10Y) was down 2 basis points to 4.07%. The shorter-end more rate-sensitive 2-year yield (US2Y) was up 4 basis points to 4.36%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Turning to active movers, General Motors (GM) was among the top percentage gainers on the S&P 500 (SP500), after the automaker’s annual profit guidance impressed investors.
Conversely, parcel delivery giant UPS (UPS) was among the top S&P percentage losers. The firm – seen as a global economic bellwether – issued disappointing guidance and announced plans to cut 12K jobs as a result of higher union labor costs and soft demand.