The Dow fell 300 points after strong jobs data signals the Fed may be in hiking mode

Stocks fell on Thursday after jobs data showed the labor market remained strong amid interest rate hikes by the Federal Reserve to control inflation.

The Dow Jones industrial average fell 310 points, or 0.89%, but was the lowest of the day. The S&P 500 and Nasdaq Composite fell 1.02% and 1.18%, respectively. Bond yields were higher.

After that the stocks started to fall The ADP private payrolls report showed employers added 235,000 jobs December, Above economists’ estimates. Wages also rose more than expected, another sign that the labor market is hot. Later in the morning, weekly jobless claims came in below expectations and showed a drop in continuous claims.

“We’ll get a better overall picture of the jobs market tomorrow, with private payrolls beating expectations and jobless claims coming down, signs that the labor market is resilient,” said Mike Lowengard of Morgan Stanley’s Global Investment Office.

“These come with big-name companies announcing significant job cuts, so there’s no doubt that market pressures are weighing on companies, but it remains to be seen when hiring will slow down,” he added.

Stocks rose from lows in the afternoon but remained lower when St. Louis Federal Reserve President James Bullard said in a speech that 2023 could be an inflationary year. He also noted that while the current policy is not “sufficiently restrictive”, it is moving in that direction and should achieve it this year.

On Friday, investors will review the December jobs report for updated data on employment and hourly wages. Economists estimated that U.S. employers added about 200,000 jobs in December, marking a modest slowdown from the previous month’s gains.

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A higher number would be more bad news for the central bank given that the labor market is still strong. Additionally, investors don’t want to see big gains in wage growth, which could mean higher inflation.

Correction: Lowengard’s last name was misspelled in an earlier version.

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