The major stock market indexes all posted losses, but improved in afternoon trading on Thursday. The June ADP payroll numbers shook investors with the largest monthly increase since July 2022, sending fears of more rate hikes.
The ADP private payroll number came in at an unexpectedly high 497,000 vs. the 235,000 Econoday consensus. This compares with a much lower revised 267,000 May payrolls number.
The June increase was led by robust hiring in the leisure and hospitality industries, with 232,000 new openings. Other strong areas included construction, transportation and utilities.
Initial jobless claims were 248,000 for the week ended July 1, vs. the 245,000 expected, and higher than the revised 236,000 in the prior week. The May job openings tallied a lower 9.824 million vs. the 9.9 million Econoday estimate.
The 10-year Treasury yield jumped 9 basis points to 4.04%, climbing above the 4% level for the first time since March. The CME FedWatch Tool showed over 90% odds for a quarter-point hike at the July 26 Fed meeting, higher than on Wednesday.
The labor data gave investors more reason to believe the Federal Reserve will raise rates at the July meeting, and perhaps longer.
The CME Fed Watch Tool now shows an over 60% chance of an additional quarter-point rate hike at the September Fed meeting.
Look for the June employment report on Friday at 8:30 a.m. ET. The June nonfarm payrolls estimate sits at a 213,000 rise, well below the 339,000 May number. Private payrolls are expected to increase 199,000 vs. 283,000 in May.
The June Institute for Supply Management (ISM) services index rose to 53.9 vs. the 50.8 forecast. A reading above 50 for the composite index shows that the services economy is expanding; below 50 indicates that it is contracting.
Major Indexes Lose Over 1%
The Nasdaq pulled back 1% in afternoon trading. The Dow Jones Industrial Average fell 1.1% and the S&P 500 shed 0.9%. The small-cap Russell 2000 fared worse and slid 1.9%.
The Nasdaq 100-tracking Invesco QQQ Trust ETF dropped 0.9%.
The Innovator IBD 50 ETF backed off 1.9%, underperforming the market indexes. NYSE and Nasdaq volume was higher, compared with the same time on Wednesday.
Stock Market Action: AI Stock Pulls Back
Data analytics stock Palantir Technologies sank 4.1% to find support at its 21-day exponential moving average. The pullback showed some profit-taking after shares rallied over 130% this year so far.
Shares are above the 20% profit zone of a cup-with-handle base.
Palantir has branched into artificial intelligence (AI) with government customers for intelligence gathering, counterterrorism and military purposes. Analysts expect over 250% earnings growth for full-year 2023 and 14% next year.
Shares of Facebook and Instagram parent Meta Platforms reversed course and slipped 0.4% after it launched its Twitter rival product, called Threads, on Wednesday evening. The new service quickly gained 10 million sign-ups.
Meta shares are extended with no clear entry point.
IBD 50 stock Global-e Online popped 1.1% in heavy volume to an 18-month high, after Piper Sandler raised its price target to 54 from 38 and maintained its overweight rating. Shares are in the profit zone of an undefined base with a 34.82 buy point.
The Israel-based e-commerce platform company is not currently profitable, but its losses are narrowing. Global-e Online has produced consistent quarterly sales growth exceeding 50% for over eight quarters.
IBD 50 stock MercadoLibre sold off 7.6% in heavy volume and erased yesterday's 4.5% gain when it found resistance at the 50-day line. Shares of the Latin American e-commerce platform fell below its 21-day line in today's move.
Dow Jones stock American Express tumbled 2.4% after Baird downgraded the credit card payment stock to neutral from overweight with a 185 price target. Shares tested the 21-day line, where it found support.
Stock Market Movers: Restaurant Chain Rallies
Genius Sports gapped up over 22% in huge volume, after the sports betting and media company announced it will extend its multiyear partnership with the National Football League. The stock is above the 5% buy zone of a choppy base with a 5.82 buy point.
Healthy food restaurant chain Sweetgreen surged over 17% after BofA Securities upgraded the stock to a buy rating from neutral and raised its price target to 17 from 9.
Keurig Dr Pepper rose 1.5% after Morgan Stanley upgraded the beverage stock to overweight from equal weight and maintained its 36 price target. The beverage stock reclaimed its 50-day moving average, but remains in a prolonged downturn. Its Relative Strength Rating is a woeful 19.
HubSpot eased from larger losses, now down 1.8% after Piper Sandler downgraded the customer relationship management platform to neutral from overweight, but raised its price target to 520 from 482.
HUBS fell below it 21-day line.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
