Wall Street pulls back on weak jobs data

Oil down around 2%

People sit outside the New York Stock Exchange (NYSE) in New York City, U.S., September 15, 2016. REUTERS/Brendan McDermid

People sit outside the New York Stock Exchange (NYSE) in New York City, U.S., September 15, 2016. REUTERS/Brendan McDermid

Brendan McDermid

BOSTON- Wall Street started Wednesday in a pessimistic mood after data showed that U.S. jobs growth slowed in July, helping pull stocks and oil prices down, with Treasuries flat.

U.S. private payrolls increased far less than expected in July, likely constrained by shortages of workers and raw materials. Employers added 330,000 jobs last month, the ADP National Employment Report showed on Wednesday, versus an increase of 695,000 forecast by economists polled by Reuters. 

The Dow Jones Industrial Average fell 151.96 points, or 0.43%, to 34,964.44, the S&P 500 lost 10.65 points, or 0.24%, to 4,412.5 and the Nasdaq Composite added 3.64 points, or 0.02%, to 14,764.94.

“The market is surprising resilient given the weak ADP numbers and a bond market apparently signaling slower growth ahead," said Nancy Tengler, chief investment officer of Nashville-based asset manager Laffer Tengler Investments.

She pointed to the positive growth indicators from manufacturing inventories and demand for services, but cited concern over COVID in China and related economic slow-downs.

MSCI's gauge of stocks across the globe gained 0.09%.

Traders sent U.S. Treasury yields lower after the government said it is considering a reduction in issuance and the payroll report. Yields subsequently stabilized to pre-open levels. 

Ten-year notes last fell 3/32 in price to yield 1.1837%, from 1.174% late on Tuesday.

Strong corporate profits have eased concerns over the COVID-19 pandemic, as vaccine roll-outs continue apace in developed markets. But investors are also weighing inflationary pressures and a growing belief that the Federal Reserve may soon signal its intention to trim support for the economy.

St. Louis Federal Reserve President James Bullard said on Wednesday that the U.S. labor market is likely to recover at a pace of about 500,000 jobs a month. The return to pre-pandemic employment levels by next summer would lend support to tapering asset purchases and, if needed, raising interest rates next year, Bullard said during an online interview with the Washington Post. 

Investors are waiting for the latest U.S. non-farm payroll numbers on Friday - the last before Federal Reserve leaders convene in Jackson Hole, Wyoming, to discuss policy and decide future stimulus strategy.

Oil prices were negative as the spread of the Delta variant in top consuming countries outweighed Mideast geopolitical tensions and a fall in U.S. inventories. 

U.S. crude CLc1 recently fell 2.1% to $69.08 per barrel and Brent was at $71.26, down 1.59% on the day.

The dollar index rose 0.137%, with the euro down 0.07% to $1.1852.

Gold prices edged higher due to a weaker dollar, although gains were kept in check ahead of U.S. jobs data later this week, seen as pivotal to the Federal Reserve's monetary policy strategy. 

Spot gold  added 0.3% to $1,815.27 an ounce. U.S. gold futures gained 0.58% to $1,820.60 an ounce.

(Reporting by Lawrence Delevingne; Editing by Dan Grebler) ((lawrence.delevingne@thomsonreuters.com))

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