U.S. stocks closed lower for a second straight session on Tuesday after data indicating that the labour market remained on solid ground dimmed hopes the Federal Reserve might have enough reason to begin reducing the size of its interest rate hikes. The Canadian benchmark index, however, ended higher thanks mostly to gains in energy and materials stocks as commodity prices rose.
A survey showed U.S. job openings unexpectedly rose in September, suggesting that demand for labour remains strong even as the central bank has embarked on a path of aggressive rate hikes in an effort to bring down stubbornly high inflation.
Investors have been paying close attention to labour market data for any signs of weakening in the job market, as decreasing wage pressures and easing demand 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.
The sharp focus on labour market data overshadowed another report which showed U.S. manufacturing activity grew at its slowest pace in nearly 2-1/2 years in October as rising rates cool demand for goods and pricing pressures on manufacturers lessened.
“That is the concern for the market is we know the Fed wants to slow down the labor market, they want to slow down hiring so demand drops in the economy, which will help inflation,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
“From an employment standpoint things look really robust though, and that is putting some pressure on stocks.”
The Dow Jones Industrial Average fell 79.75 points, or 0.24%, to 32,653.2, the S&P 500 lost 15.88 points, or 0.41%, to 3,856.1 and the Nasdaq Composite dropped 97.30 points, or 0.89%, to 10,890.85.
The Fed is set to release its policy statement at 2 p.m. EDT on Wednesday, and investors will be closely eyeing any signals in the statement or comments from Fed Chair Jerome Powell afterward that the central bank is contemplating decreasing its rate hikes.
The S&P/TSX Composite Index closed up 91.57 points, or 0.47%, at 19,517.71.
The energy sector rose 1.2% as U.S. West Texas Intermediate crude gained $1.84, or 2.1%, to $88.37. Traders cited optimism that China, the world’s second-largest oil consumer, could reopen from strict COVID curbs.
An unverified note trending in social media, and tweeted by influential economist Hao Hong, said a “Reopening Committee” has been formed by Politburo Standing Member Wang Huning, and was reviewing overseas COVID data to assess various reopening scenarios, aiming to relax COVID rules in March, 2023. Hong Kong and China stocks jumped on the rumours.
A Chinese foreign ministry spokesman later said he was unaware of the situation.
The TSX materials sector rose 2.4% as the price of gold rose over 1%, and copper - which was also buoyed by the reports out of China - gained more than 2%.
The TSX suffered a brief interruption to trading Monday morning due to a technical glitch. TMX Group said its trading platforms experienced a connection issue that paused all equities trading activity for nearly an hour.
On Wall Street, energy was the best-performing S&P sector, gaining 0.99%.
Megacap growth names such as Amazon and Apple , which have struggled since the Fed began raising interest rates, were once again under pressure, falling 5.52% and 1.75%, respectively.
Uber Technologies surged 11.97% after giving an upbeat fourth-quarter profit view that also lifted shares of its peers Lyft Inc, up 3.48% and DoorDash, up 3.61%.
Pfizer rose 3.14% after the drugmaker raised full-year sales estimates for its COVID-19 vaccine, while Eli Lilly fell 2.63% after trimming its profit forecast.
In currency markets, the Canadian dollar was little changed against the greenback, giving back its earlier gains as domestic data showed factory activity decreasing for a third month. The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) fell to a seasonally adjusted 48.8 in October from 49.8 in September as production and new orders declined.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year rose 1.7 basis points to 3.267%, after earlier touching its lowest level since Oct. 5 at 3.153%.
Reuters, Globe staff