By Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stocks retreated for a second straight session on Tuesday after data indicating the labor market remained on firm footing dented hopes the Federal Reserve might have cause to begin decreasing the size of its interest rate hikes.
A survey showed U.S. job openings unexpectedly rose in September, suggesting that demand for labor remains strong even as the central bank has embarked on a path of aggressive interest rate hikes in an effort to bring down stubbornly high inflation.
Investors have been paying close attention to labor market data for any signs of weakening in the job market, as decreasing wage pressures would help reduce inflation, giving the Fed the ammunition to begin decelerating with a 50-basis-point rate hike in December.
Growing expectations the central bank may have enough justification to begin slowing in December — partly due to data pointing to a weakening economy and a corporate earnings season that has been better than expected — helped stocks rally in October, with the Dow notching its biggest monthly percentage gain since 1976.
Other data showed U.S. manufacturing activity grew at its slowest pace in nearly 2-1/2 years in October as rising interest rates cool demand for goods.
“You saw the manufacturing index, the good side of the equation, becoming disinflationary, and so everyone is waiting for this lagging employment indicator to actually crack because it is hard for me to find anywhere else in the economy that is actually strong,” said Schutte, chief investment officer at Northwestern (NASDAQ:) Mutual Wealth Management Company in Milwaukee, Wisconsin.
“It has been easy for the Fed to hike because they are winning on their employment mandate but they are losing on their inflation mandate; the next few months of data will provide them with a tougher backdrop for rate hikes.”
The fell 87.34 points, or 0.27%, to 32,645.61, the lost 14.08 points, or 0.36%, to 3,857.9 and the dropped 76.04 points, or 0.69%, to 10,912.10.
The Fed is set to release its policy statement at 2 p.m. EDT (1800 GMT) on Wednesday, and investors will be closely eyeing any signals in the statement or comments from Fed Chair Jerome Powell afterwards that the central bank is contemplating decreasing its rate hikes.
Energy was the best performing S&P sector, up 1.12%, lifted by a gain in crude prices on an unverified report that China was considering lifting its strict COVID-19 regulations.
That also helped boost U.S.-listed shares of Chinese firms such as JD (NASDAQ:).Com, up 3.86%, and Alibaba (NYSE:) Group Holding, which gained 5.12%.
Megacap growth names such as Amazon (NASDAQ:), off 5.63% and Apple (NASDAQ:), down 1.91%, which have struggled since the Fed began raising interest rates, were once again under pressure.
Uber Technologies (NYSE:) surged 12.35% after giving an upbeat fourth-quarter profit view that also lifted shares of its rivals Lyft Inc (NASDAQ:) and DoorDash.
Pfizer (NYSE:) rose 3.20% after the drugmaker raised full-year sales estimates for its COVID-19 vaccine, while Eli Lilly (NYSE:) slipped 4.6% after trimming its profit forecast.
Advancing issues outnumbered declining ones on the NYSE by a 1.89-to-1 ratio; on Nasdaq, a 1.56-to-1 ratio favored advancers.
The S&P 500 posted 23 new 52-week highs and eight new lows; the Nasdaq Composite recorded 98 new highs and 89 new lows.