U.S. stocks sank and oil prices held steady Tuesday as new data showed fresh signs of labor market cooling and declining factory orders from businesses.
The S&P 500 (^GSPC) declined nearly 0.6%, and the Dow Jones Industrial Average (^DJI) slipped around the same amount. The technology-heavy Nasdaq Composite (^IXIC) slid 0.5%.
Oil prices steadied, with WTI crude oil — the U.S. benchmark — wavering around $80 a barrel. After big gains Monday, oil was back in its four-month trading range after OPEC+ announced it would slash output by 1.16 million barrels per day.
On the economic front, vacancies at U.S. employers fell to 9.93 million from 10.5 million, a bigger fall than expected. On the other hand, quits were up and layoffs were down, data from the Bureau of Labor Statistics showed. Separately, factory orders fell 0.3%, also lower than anticipated.
Some economists view the slowdown in the number of open job positions as “progress” to reaching the Fed’s goal of an equilibrium between supply and demand in the labor market.
“While the Fed will welcome the softening in the data, officials will put much more stock in Friday’s employment report and will continue to raise rates at the coming meetings to ensure further progress is made toward softer labor market conditions and lower inflation,” Matthew Martin, U.S. economist at Oxford Economics, wrote in a note to clients on Tuesday.
As Martin noted, another data print on which Wall Street will be keeping a close eye is Friday’s jobs report. Economists surveyed by Bloomberg expect the report to show 240,000 jobs created last month. This would be lower than the average job gains of 343,000 over the last six months.
Bond yields moved downward after the data prints. The yield on the benchmark 10-year U.S. Treasury note dipped to 3.35% Tuesday.
Tuesday’s moves came after the Dow rose and the S&P 500 closed up 0.4% on Monday but the Nasdaq 100 lagged, falling 0.3%. Bond yields were down as manufacturing activity slumped to the lowest level since May 2020, signaling further declines could be coming as credit conditions tighten.
Meanwhile, Federal Reserve Bank of St. Louis President James Bullard said Monday that the continued strength in the labor market gives the Fed room to fight inflation. Bullard also commented on OPEC’s decision to cut output, suggesting it could potentially make the Fed’s job of lowering inflation more challenging as oil prices increase.
Separately, Federal Reserve Governor Lisa Cook also highlighted the continued tightness in the labor market.
“We are still going to see inflation from that, but we’ve seen wage gains moderating quite a bit,” she said.
Still, the Federal Reserve has stuck with inflation as its top concern, even amid the recent banking turmoil that has shown signs of easing.
“The Fed rate expected for the next meeting was largely flat against this backdrop, climbing a modest 1.6 basis points to 4.973% with a 63% chance priced in for a 25 basis-point hike next month,” Jim Reid and colleagues at Deutsche Bank wrote in a note to clients.
However, the recent banking troubles triggered by the failures at Silicon Valley Bank and Signature Bank are “not over yet,” JPMorgan Chase CEO Jamie Dimon said Tuesday.
In his closely watched annual letter to shareholders, Dimon outlined the damages of financial system turmoil on all banks and urged lawmakers to not “overreact” with more regulation.
Elsewhere, Credit Suisse chairman Axel Lehmann apologized for the bank’s failure to save the institution as the firm had been draining deposits for months.
Meanwhile, under the current backdrop, the rally in equities will likely waver given the recent bank failures. The oil surprise and a slowdown in growth could send stocks back to their low levels seen in 2022, said JPMorgan strategist Marko Kolanovic.
In single-stock moves, shares of AMC Entertainment Holdings (AMC) plunged Tuesday after a settlement would allow AMC to convert APE preferred shares into common AMC stock.
And Disney’s feud with Florida Gov. Ron DeSantis escalated. CEO Bob Iger called the governor’s retaliation “anti-business” and “anti-Florida.” Shares of Disney (DIS) ticked down Tuesday.
Shares of Virgin Orbit Holdings, Inc. (VORB) sank after the company filed for bankruptcy late Monday after laying off about 85% of its staff in March.
C3.ai, Inc. (AI) shares fell about 26% Tuesday after Kerrisdale Capital, a firm that holds a short position in AI stock, said it has sent a letter to the software maker’s auditor.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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