There was plenty for investors to consider on Thursday, including a pair of labor market updates and speculation that one of Wall Street’s most struggling retailers might go bankrupt. Market participants made it clear that they didn’t like anything they saw, driving the stock further lower.
Before the opening bell today, the Department of Labor said that weekly jobless claims (opens in a new tab) fell from 19,000 to 204,000 in the last week of 2022, more than economists expected. Continuing claims also fell slightly, down from 24,000 to 1.7 million.
Additionally, a report by ADP showed that the private sector added 235,000 jobs in December. Not only was that more than the 182,000 private jobs created in November, but it beat economists’ consensus estimate for 153,000 new jobs.
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Both data points underscore an extremely tight labor market – a sticking point for the Federal Reserve in its fight against inflation. To complicate matters, the numbers precede tomorrow’s much-anticipated December jobs report (more on that below).
Employment data followed layoff announcements from several large companies. Among the most recent cuts to be unveiled were Amazon.co.uk (AMZN (opens in a new tab)-2.4%), which announced the disappearance of 18,000 pink sheets, and stitch correction (SFIX (opens in a new tab)+9.4%), which has undertaken to reduce the salaried workforce by 20%.
In other Single Stock news, Bed bath and beyond (BBBY (opens in a new tab)) climbed 29.9% after the homewares retailer fueled bankruptcy speculation following a commercial update (opens in a new tab). BBBY said it expects to report a net loss of $385.8 million in its fiscal third quarter and anticipates lower year-over-year sales due to “declining customer traffic and reduction in stock availability levels”. Additionally, Bed Bath & Beyond said it had “substantial doubts” about its ability to continue operating, given “recurring losses and negative cash flow from operations”. The company is exploring strategic alternatives, including selling assets or filing for bankruptcy.
With regard to the main stock market indices, the Dow Jones Industrial Average lost 1.0% to 32,930, the S&P500 returned 1.2% to 3,808, and the Nasdaq Compound fell 1.5% to 10,305.
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The apprehension around tomorrow’s jobs report is mounting, especially in the wake of today’s economic reports and Wednesday’s Fed Minutes in which the central bank reiterated its support for a “restrictive policy stance” to bring down inflation.
“As we await tomorrow’s jobs report, there is a lot of angst in the air,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “One of the most predicted recessions in history is very likely to hit this year. Yesterday’s manufacturing business sentiment survey was down, seemingly confirming this result. The Fed is looking to significantly weaken the labor market, in search of lower inflation, and according to meeting notes released yesterday, it will continue to raise rates until that happens.”
And while all signs suggest the labor market will weaken significantly, little to no movement on that front was likely made in December. The consensus estimate, adds McMillan, is that the economy added 200,000 jobs last month, slightly lower than what we’ve seen in recent months, but still strong growth.
This keeps the potential for volatility high, but also serves as a lesson to market participants that investing is a marathon, not a sprint. In other words, stay focused on the quality names that have the highest probability of weathering the storm. One place to find these businesses that stay put is with the best Dow dividend stocksa collection of best-in-class companies well positioned to generate revenue and deliver superior performance in times of market uncertainty.