S&P 500 Index Weighed Down by Disappointing Private Sector Jobs Data, Rate Hike Concerns

The U.S. benchmark S&P 500 Index is trading nearly flat shortly after the cash market opening on Wednesday. The price action suggests the absence of a few major players and institutions as several head to the sidelines ahead of Friday’s major U.S. Non-Farm Payrolls report. Additionally, the early action suggests the index is being propped by a strong performance in the technology sector, but being capped by a dismal performance in the energy sector.

At 14:54 GMT, the S&P 500 Index is at 3990.78, up 4.62 or +0.12%. The S&P Trust ETF (SPY) is at $398.66, up $0.50 or +0.09%.

To recap the early trade, the benchmark index is being supported by technology and growth stocks as the broad market attempts to rebound from three losing sessions. That sell-off was fueled by rate hike worries.

Today, a weaker-than-expected private payrolls report and a drop in oil prices is helping to ease some worries about inflation, but not necessarily concerns about aggressive rate hikes by the Fed. This is contributing to a tight trading range along with the low pre-report volume.

US Private Payrolls Gain but Lose Momentum in August

U.S. private payrolls increased by 132,000 jobs in August after rising 270,000 in July, the ADP National Employment Report showed on Wednesday. The Dow Jones estimate for the ADP count was 300,000. The firm also reported annual pay was up 7.6% for the month.

“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” said ADP’s chief economist, Nela Richardson. “We could be at an inflection point, from super-charged job gains to something more normal.”

Stocks Suppressed by Fresh Hawkish Fed Chatter

Investors are going to have to get used to the fact that moving forward, Fed officials aren’t going to be afraid to talk their position on future rate hikes. Today, it was Cleveland Federal Reserve President Loretta Mester who sounded the hawkish alarm.

Mester said Wednesday she sees interest rates rising considerably higher before the central bank can ease off in its fight against inflation.

Mester, a voting member this year of the rate-setting Federal Open Market Committee, said she sees benchmark rates rising above 4% in the coming months. That’s well above the current target range of 2.25%-2.5% for the fed funds rate, which sets what banks charge each other for overnight borrowing but is tied to many consumer debt instruments.

The markets are currently pricing in only a 1-in-3 chance of the funds rate climbing above 4% next year.

Key Sectors and Stocks

The Energy Sector is down 1.7% shortly before the mid-session on Wednesday as U.S. crude oil prices fell 1.4% to $90.31 a barrel on recession fears.

The Technology Sector is outperforming the broad index, led by gains in SNAP, Twitter, Pinterest and Meta Platforms. SNAP jumped about 11.4% and the others were up between 1.5% and 5.8%.