U.S. stocks end lower, resume a multiday slide ahead of Friday jobs report

By Joy Wiltermuth and Joseph Adinolfi

Dow fell in 10 or past 13 trading sessions

U.S. stocks finished lower while Treasury yields eased as investors awaited Friday's monthly jobs report from the Labor Department.

What happened

The Dow Jones Industrial Average DJIA shed 9.98 points, or less than 0.1%, to end at 33,119.57, marking a fall in 10 of the past 13 trading sessions, according to Dow Jones Market Data.The S&P 500 SPX fell 5.56, or 0.1%, closing at 4,258.19. The Nasdaq Composite COMP slipped 16.18 points, or 0.1%, finishing at 13,219.83.

On Wednesday, the Dow Jones Industrial Average rose 0.4%, to 33,130, snapping a three-day losing streak, while the S&P 500 gained 0.8%, to 4,264 for its biggest percentage-point gain in three weeks, FactSet data show.

What drove markets

Investors were staying cautious ahead of Friday's jobs report for September, even with a slight pullback in long-term Treasury yields that have been battering stocks.

"The jobs report is kind of critical this time," said Randy Frederick, managing director of trading and derivates at Schwab Center for Financial Research, by phone Thursday afternoon.

He sees a chance that a stronger-than-expected labor report could spark a deeper selloff in stocks and feed fears of more rate hikes to come from the Federal Reserve as it seeks to keep inflation coming down.

See: U.S. jobs report forecast: 170,000 new workers and 3.7% unemployment

"I don't think the equity markets like good news right now," Frederick said. "Especially not with high rates, a high dollar and high oil prices beating up the markets."

Treasury yields slipped for a second day Thursday morning, as investors digested a batch of fresh economic data. The yield on the 10-year Treasury note BX:TMUBMUSD10Y slipped 2 basis points to 4.715%, below the 16-year high reached earlier this week, but above a September low near 4.3%.

"But after three big days up, that doesn't do a whole lot," Frederick said. "Because the overall trend is clearly a bit higher."

Rising Treasury yields, particularly on the long end of the yield curve, have been widely blamed for driving the selloff in stocks that has taken place since early August.

In economic data, a weekly report on jobless-claims data showed no sign that layoffs have been increasing. Rising layoffs are seen as a necessary prerequisite for the Federal Reserve to start easing its monetary policy, which has weighed on both stocks and bonds since early 2022. Government data showed the number of Americans who applied for unemployment benefits last week rose slightly to 207,000, but remained near pandemic-era lows.

Investors also received data on the U.S. international trade deficit which suggested some weakness in consumer spending, but analysts chiefly blamed the jobless claims numbers for the impact on yields and stocks.

"Financial markets have been rattled in the last few days," said Bill Adams, chief economist for Comerica Bank. "The yield on the 10-year Treasury note has jumped about 0.6 percentage points since the beginning of September, extending a steady march higher since the early summer."

"There are competing explanations for the surge in interest rates and they have very different implications. Treasury issuance is way up this year with a higher deficit, and the Fed is no longer a buyer; rising interest rates would be the classic warning that the deficit is starting to crowd out private-sector access to capital. But Treasury yields rose in August, too, even though the Federal government ran a monthly surplus in the month."

Several senior Fed officials were speaking on Thursday, including San Francisco Fed President Mary Daly, who said interest rates can be held steady if the labor market and inflation continue to cool, according to Bloomberg.

Choppy trading in recent days sent the Cboe VIX index VIX, a gauge of expected equity-market volatility, to 20 for the first time in four months as stocks tumbled. Some analysts see a near-term rebound ahead, but many argue the direction of bond yields remains critical for stocks.

Companies in focus

Constellation Brands Inc. STZ shares shed 3.2% after the beverage giant posted better-than-expected earnings for its fiscal second quarter but analysts said they were underwhelmed by the company's guidance.Exxon Mobil's XOM shares fell 2.3% after the company said rising crude prices are likely to boost its third-quarter profit by $1 billion, but thinner margins from chemicals will hurt profits by as much as $600 million. Analysts at RBC say that the update from Exxon is likely to result in earnings above consensus expectations but roughly in line with investor expectations. Rivian Automotive Inc. RIVN shares dropped 22.8% after the EV maker said it plans to offer $1.5 billion worth of "green" convertible senior notes due in 2030, and issued preliminary sales estimates that met Wall Street's expectations. Clorox Co. shares CLX fell 5.2% after the company cut its outlook following disruptions caused by a cyberattack first reported in August. General Motors Co.GM shares shed 2.4% Thursday following a news report saying that the carmaker may be facing a massive recall in connection with defective air-bag inflators.VinFast Auto Ltd. VFS shares gained 5.6% Thursday after the Vietnam-based EV maker reported third-quarter revenue that more than doubled from a year ago. Shares still remained well under their $22 IPO price.

----Jamie Chisholm contributed reporting

-Joy Wiltermuth -Joseph Adinolfi

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10-05-23 1624ET

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