US STOCKS Wall St slips due to labor market data fueling Fed worry

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Procter & Gamble falls after commodity cost pressure warning

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Netflix slows down ahead of quarterly results

(Updates after market close)

By Chuck Mikolajczak

NEW YORK – U.S. stocks closed lower on Thursday following data pointing at a tight labor marketplace. This renewed concern that the Federal Reserve will keep its aggressive rate hikes that could push the economy into a recession.

The Labor Department reported that weekly jobless claims were lower as expected. This indicates that the labor market is still strong despite Fed efforts to reduce demand.

Reports that expected the central bank to further reduce the size and frequency of its interest rate rises at its next policy announcement next month were unaltered by the report.

Investors are looking for signs that the labor market is weakening to help the Fed slow down its policy tightening.

Other data indicated that manufacturing activity in mid-Atlantic was again subdued in January. Data from the commerce department confirmed that the housing market is still in recession.

“What we are witnessing is the market carving out an uncertainty bottom so the news is having a less effect and what are we seeing today is really just that,” Brad McMillan chief investment officer of Commonwealth Financial Network, an independently owned broker-dealer based in Waltham, Massachusetts.

“The fact that we aren’t seeing more reaction to this news says a lot about the bad news out there.”

According to preliminary data, the S&P 500 lost 29.70 points, or 0.76%, to end at 3,899.16 points, while the Nasdaq Composite lost 104.76 points, or 0.96%, to 10,852.25. The Dow Jones Industrial Average dropped 250.98 point, or 0.75% to 33.045.98.

Recent comments by Fed officials continue the emphasis on the disconnect between central bank’s view regarding its terminal rate and market expectations.

Susan Collins, president of Boston Fed, supported the call for interest rates to rise above 5% by echoing comments made by other policymakers.

Stocks recovered from session lows, however, after Lael Brainard, Fed vice chair, stated that the Fed is still “probing”, for the right level of interest rates to control inflation.

However, markets see the terminal rate at 4.899% by June. They have also largely priced in a 25 basis point rate increase from the U.S. central banks in February and rate cuts in the second half of the year.

Both the S&P 500 and the Dow fell for a third straight session, their longest streak of declines in a month.

On the earnings front, Procter & Gamble Co declined after warning of commodity costs pressuring profits, despite raising its full-year sales forecast.

Analysts now expect year-over-year earnings from S&P 500 companies to decline 2.8% for the fourth quarter, according to Refinitiv data, compared with a 1.6% decline in the beginning of the year.

Netflix Inc. lost ground before its results were released on Thursday at the closing bell. It is expected that Netflix Inc. will report its slowest quarter-over-quarter revenue growth.

(Reporting by Chuck Mikolajczak; editing by Deepa Babington).