Yahoo Finance Countdown to Recession, or Just Cooling Down?
Market indices closed lower this Hump Day, with the Dow and S&P 500 riding either side of zero balance while the Nasdaq and Russell 2000 dipped lower early and hung together through the entire session. The Dow gained 80 points for the day, +0.24%, while the S&P closed -0.25% lower. The Nasdaq slipped -129 points or -1.07%, while the small-cap Russell finished down -0.99%.
We started off the day with one of the coolest jobs reports in recent memory from ADP ADP, with 145K new private-sector payroll adds in the month of March. A loss of nearly -100K jobs in Professional & Business Services and Financials sectors alone sent job growth into softer territory, coming in -116K private-sector jobs filled, month over month. And the U.S. Trade Balance widened in February, crossing back beneath -$70 billion on a deeper goods deficit.
Then, after the open, S&P Services PMI for February came in a notch down from expectations: 52.6 versus 53.8 forecast and reported for the previous month. ISM Services, which were released a few minutes afterward, also came in lower than anticipated: 51.2% from 54.3% expected and 55.1% in January. These both remain above the important 50 demarcation point (between growth and loss), unlike the previous day’s S&P PMI and ISM Manufacturing results, which were also lower than expected but beneath the 50 level.
All this is adding up to real evidence that higher interest rates is having an effect on different aspects of the economy, including the domestic workforce. Results like these had been lacking or middling in recent months, but even in the labor market, the trailing year’s worth of monthly private-sector jobs is roughly double what we’ve seen in the past six months. With additional layoffs in banking, consulting and tech of late, we might imagine these numbers continue to dwindle in coming months’ reports.
Tomorrow morning brings us Weekly Jobless Claims — which have remained curiously low even as other employment metrics have shown deterioration — with expectations on Initial Claims to touch 200K for only the third time in the last 12 weeks (it’s been in a range of 183K-198K during the same time period). Continuing Claims have stayed below 1.7 million in each of the 12 trading weeks but one. Will we start seeing workforce weakness in this data, as well?
The spread between 2-year and 10-year bond yields, while still inverted for the past year and counting, has dipped beneath 50 basis points today, with the 10-year yield at levels not seen since September of last year, 3.302%. The 2-year is at 3.796% currently. Another morsel of data pointing to a cooler economy. Is it also the early stages of recessionary conditions? This is the very question that seems to be halting market activity at present.
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