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US stocks slipped on Wednesday after a closely watched jobs report fell short of expectations and a top central banker issued a hawkish forecast.
Wall Street’s blue-chip S&P 500 benchmark closed 0.5 per cent lower, accelerating losses late in the New York day and easing back from an all-time high struck on Tuesday.
The lacklustre move came as investors digested a report from the Institute for Supply Management that showed the rate of activity growth in America’s services sector picked up sharply last month.
The headline number exceeded analysts’ expectations but details in the release noted “worsening labour and materials shortages”, feeding into investor fears over the fragility of the US economic recovery. Andrew Hunter, senior US economist at Capital Economics, also warned that the shortages “could push price inflation even higher”.
Traders were also analysing disappointing employment data from the payroll processor ADP ahead of Friday’s more comprehensive non-farm payrolls reports from the US government.
ADP said private employers added 330,000 new jobs in July, mostly in the services sector, significantly shy of consensus forecasts of 695,000 and the smallest gains in five months.
Ian Lyngen, an interest rate strategist at BMO Capital Markets, said the ADP numbers set a “troubling tone ahead of Friday’s jobs release and will be a touchstone for those worried that the Delta variant will continue to weigh on the real economy”.
“Overall, yet another data point suggesting peak growth might be behind the US for this cycle,” he added.
Compounding the move and further weighing on stock prices and US government debt, Federal Reserve vice-chair Richard Clarida said the central bank should position itself for rate rises at the start of 2023 as the economic recovery from the pandemic remained on track. Higher interest rates are typically seen as negative for companies as they raise input costs.
His remarks sent the yield on the 10-year Treasury note from a low for the day of 1.13 per cent up to 1.21 per cent before moving back to trade flat at 1.17 per cent.
In a contrast, technology stocks inched higher, with the tech-heavy Nasdaq Composite rising 0.1 per cent. The sector has been a hide-out for investors doubtful of the strength of the economic recovery.
Across the Atlantic, the region-wide Stoxx Europe 600 index gained 0.6 per cent to reach another record high while the UK’s FTSE 100 advanced 0.3 per cent.
Those gains followed rises in Asia where Hong Kong’s Hang Seng index climbed 0.9 per cent and the CSI 300 index of shares listed in Shanghai and Shenzhen rose 0.9 per cent.
The Hang Seng tech index, which includes the Chinese internet giant Tencent, jumped 2.4 per cent, rebounding after criticism of the technology and gaming industry by Chinese authorities hit the prices of online gaming groups earlier in the week.
Tencent, whose 11 per cent fall on Monday wiped almost $60bn off its market capitalisation, rose 2.4 per cent.
Brent crude, the global oil benchmark, retreated 3 per cent to $70.27 a barrel amid another volatile trading session.