U.S. stock markets opened mostly lower on Wednesday after a strong report on private-sector hiring in October strengthened fears that the Federal Reserve may accelerate its timetable for raising interest rates.
ADP reported that 571,000 people found work in the private sector in the month through mid-October, far more than the 400,000 expected and a number only partly mitigated by a downward revision of 45,000 to its report for September. The report suggests that the labor market has shaken off the bout of weakness caused by the wave of Delta-variant Covid-19 in the summer and that people are being sucked back into work as companies raise wages to cover labor shortages.
By 9:45 AM ET (1345 GMT), the Dow Jones Industrial Average was down 84 points, or 0.2%, at 35,969 points. The S&P 500 was down 0.1% and the Nasdaq Composite was down a little less than 0.1%. All three had closed at record highs on Tuesday, bolstered by a broadly positive earnings season and signs that the bond market had already priced in some modest monetary policy tightening from the Federal Reserve.
The Fed is expected to announce at 2:00 PM ET that it will phase out its monthly asset purchases – currently running at $120 billion – by the middle of next year. having seen gross domestic product to its pre-Covid trend and the labor market reclaim most of the jobs that were lost due to the pandemic. Chairman Jerome Powell will almost certainly be asked at his 2:30 PM press conference whether he still believes that the surge in consumer prices seen this year is “transitory.” Price data for personal consumer expenditures released earlier this week showed that price increases had broadened across a much larger part of the economy, after being isolated in a few pockets of activity earlier in the year.
While the market in general was happy to wait for the Fed, there were still big movements in certain stocks, with Bed Bath & Beyond stock returning to favor among short-squeezing retail investors. The stock rose 32% after the troubled retailer said strong sales in the second half of this year will allow it to accelerate its stock buyback program, completing it two years ahead of plan.
That emboldened fresh squeezes in two of the original ‘meme’ stocks: GameStop stock rose 21% and AMC Entertainment stock – already lifted by the cinema chain’s best weekend since the pandemic – rose 11.5%
Another stock boosted by retail traders on Tuesday, Avis Budget, held on to most of its gains despite falling 13%. Avis’s solid third-quarter performance triggered a buying frenzy on Tuesday that saw the stock price more than double.
It was a different story for Zillow stock. The online realtor fell another 17.5%, taking its losses for the week so far to over 32%, after it revealed the shocking scale of its miscalculated bet on the housing market. Zillow faces write-downs of nearly $570 million in the second half of 2021, due to losses on its attempts to flip houses. Activision Blizzard stock also fell over 14% after it delayed the launch of two key games. Jen Oneal, who had taken over as co-CEO in the wake of the sexual harassment scandal that shook the company earlier this year, also said she will stand down to focus on a role more broadly supporting gender equality in the gaming industry.
Elsewhere, Lyft stock rose 12% after the ride-hailing company reported a big improvement in its operating performance as the U.S. economy reopened. Its numbers also pushed the stock of its rival Uber up by over 6%. On a heavy day for earnings, CVS Health stock rose 3.6% and T-Mobile stock rose 5.7% after strong reports.