Investors now await the Labor Department's September jobs report, due out Friday morning.
The S&P 500 (^GSPC) closed down 1% after losses accelerated into the close while the Dow Jones Industrial Average (^DJI) tumbled nearly 350 points, or 1.15%. The technology-heavy Nasdaq Composite (^IXIC) fell 0.7%. In the bond market, meanwhile, Treasury yields nudged higher, with the benchmark 10-year note (^TNX) above 3.8% and the rate-sensitive 2-year yield at 4.2%.
Investors weighed a batch of hawkish remarks from Federal Reserve officials Thursday morning. Minneapolis Fed President Neel Kashkari acknowledged that the risk of overshooting was present as policy tightening still needs to work its way through the economy. Still, he asserted, he and his colleagues were "quite a ways away" from bringing down inflation.
Echoing that sentiment, Cleveland Fed President Loretta Mester said the U.S. is in an "unacceptably high" inflation environment.
In corporate news, shares of Pinterest (PINS) bounced nearly 5% Goldman Sachs following an upgrade from Goldman Sachs. The investment bank said it believed in Pinterest's ability to grow monetization and capture a greater share of ad budgets," also pointing to a number of long-term secular growth themes.
On the commodities front, U.S. crude oil futures sustained a gain of more than 10% this week after OPEC+ on Wednesday approved its heftiest production cut since 2020 – of 2 million barrels a day – after U.S. officials tried and failed to lobby against the move.
"These higher oil prices certainly prevent gasoline prices from continuing their seasonal drop during the winter," Lipow Oil Associates President Andrew Lipow told Yahoo Finance Live on Wednesday. "The consumer at the gas pump is already going to be seeing the impact over the next couple of weeks."
Early in the day, data from the Labor Department showed a jump in the number of Americans filing for first-time unemployment insurance last week. Initial jobless claims rose sharply to 219,000 for the week ended Oct. 1 after sliding to 193,000, the lowest since April in the prior week. Economists had estimated 203,000 claims, according to consensus estimates compiled by Bloomberg.
Other recent economic data reflecting a larger-than-expected drop in job openings and sharp cooldown in manufacturing activity has stoked optimism the Federal Reserve may pivot on its policy tightening plans sooner than expected, but many on Wall Street remain skeptical the data has moderated enough to convince officials to scale back on rate increases.
On Tuesday, investors cheered on the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), which showed vacancies dropped 1.1 million to 10.1 million on the last business day of August. However, the ADP's private employment report showed the U.S. economy added 208,000 jobs in September, more than expected, and continuing a trend of upside surprises to labor market data.
“Prior to non-farm payrolls (NFP) this Friday and CPI next Wednesday, the market has been oscillating between the ‘hawkish Fed’ and ‘Fed pivot’ narrative,” analysts at JPMorgan said in a note Thursday, adding that other data points, including the ADP’s jobs reading, “proves the economy still remains strong and therefore weakens the hope of a near-term pivot from the Fed.”
The Labor Department’s September jobs report due out at 8:30 a.m. ET on Friday morning will prove to be the most important release for investors. Economists expect nonfarm payrolls rose by 260,000 last month, per the latest estimates from Bloomberg.
“Equity bulls would need a print around 100,000 to see the market alter its Fed expectations,” JPMorgan noted.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc