NEW YORK (AP) — Wall Street drifted to a mixed close following signals that the job market remains solid, though it may be a touch too strong. The S&P 500 slipped 0.3% Thursday. The Dow Jones Industrial Average ended basically flat, and the Nasdaq composite fell 0.6%. Treasury yields rose after reports indicated employers hired more people last month than expected and laid off fewer last week than forecast. That’s good news for workers. But it could also weaken the main hope that’s driven Wall Street’s big recent rally, that the economy is cooling enough for the Federal Reserve to cut interest rates sharply in 2024.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Wall Street is drifting Thursday following signals that the job market remains solid, though it may be a touch too strong.
The S&P 500 was virtually flat in late trading. The Dow Jones Industrial Average was up 114 points, or 0.3%, with less than an hour remaining in trading, and the Nasdaq composite was 0.2% lower.
Walgreens Boots Alliance sank 6.8% after it nearly halved its dividend so it could hold onto more cash. That helped offset stocks of airlines and cruise-ship operators, which rose to regain some of their sharp losses from earlier in the week. Carnival steamed 3% higher, and United Airlines got a 2.7% lift as falling crude prices hinted at lower fuel costs.
U.S. stocks have broadly regressed this week after rallying nine straight weeks into the end of last year. Critics said the market was due for at least a breather following its big run, which fed on hopes that inflation has cooled enough for the Federal Reserve to cut interest rates sharply this year.
Rate cuts give a boost to prices for stocks and other investments, while also relaxing the pressure on the economy and financial system. Treasury yields in the bond market have already eased since autumn on hopes for such cuts, releasing pressure on the stock market.
But Treasury yields rose Thursday following a couple reports on the job market that were stronger than expected. The economy is in a delicate phase where investors want it to remain solid, but not too hot.
A healthy job market is of course good for workers and stamps out worries about an imminent recession. But too much strength could prod the Federal Reserve to keep interest rates high because it could keep upward pressure on inflation. And the Fed has already hiked its main interest rate to the highest level since 2001.
One report from the U.S. government on Thursday showed fewer U.S. workers filed for unemployment benefits last week than expected. Another from ADP Research Institute said private employers accelerated their hiring last month by more than economists expected.
A more comprehensive report on the jobs market from the U.S. Labor Department will arrive on Friday. Economists expect that to show U.S. hiring slowed to 160,000 jobs last month from 199,000 in November.
“If tomorrow’s numbers show the same kind of strength and the economy keeps rolling along, it’s fair to wonder why the Fed would be in a rush to cut rates,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley.
Traders are betting the Federal Reserve will cut interest rates by twice as much this year as the central bank has indicated. Wall Street is also thinking the first cut could come as soon as March, and a stronger-than-expected economy makes such predictions less realistic. Critics had already called them overly aggressive.
A third report from S&P Global said that growth for financial businesses and others in U.S. services industries was a touch stronger last month than expected.
Following Thursday’s data reports, the yield on the 10-year Treasury rose to 3.99% from 3.91% late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for the Fed, climbed to 4.38% from 4.33%.
Stocks have already rallied in part on expectations for sharp cuts coming to interest rates soon. If the Fed doesn’t cut as deeply and as quickly as expected, prices for stocks and other investments could be in jeopardy.
On Wall Street, Peloton Interactive jumped 14.5% after it announced a partnership to bring its workout content to TikTok.
APA fell 7% after it said it will buy Callon Petroleum in an all-stock deal valued at roughly $4.5 billion, including debt. Callon Petroleum gained 3.5%.
In stock markets abroad, indexes were modestly higher in much of Europe and a bit lower in much of Asia.
In Tokyo, the mood was somber as the market reopened from the New Year holidays with a moment of silence after a major earthquake Monday left at least 77 people dead and dozens missing.
Dark-suited officials bowed their heads in a ceremony that usually features women clad in colorful kimonos. Japan’s benchmark Nikkei 225 fell 0.5%.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
Stan Choe, The Associated Press
