Dow closes 200 points lower as fewer job openings stoke recession worries

By Frances Yue and Andrew Keshner

U.S. stocks closed lower Tuesday, with the Dow and the S&P 500 index snapping a four-day winning streak, as investors weighed new declines in factory orders, data hinting at a softening labor market ahead of Friday's jobs report, and what that means for recession fears and interest rates.

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Stocks finished lower Tuesday as investors weighed more signs of a slowing economy.

The number of U.S. job openings in February fell to a 21-month low, according to Labor Department data. There were 9.9 million openings, fewer than analyst expectations for 10.5 million openings and it's down from 10.6 million job openings in January.

Meanwhile, orders for manufactured goods fell for the third time in the past four months. The 0.7% drop in February was slightly larger than the 0.6% expectation from economists surveyed by The Wall Street Journal.

Trading at the start of the second quarter is being dragged by numbers indicating weaker economic growth in March, said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management. "Weaker growth is going to mean weaker profits, and that's going to be tough for equities to navigate," he said.

Read:'We are going to see parts of the economy break': Recession fears move back to the forefront of markets

Still, stocks' decline on Tuesday may just reflect a technical pullback and may not stem from the job openings data, said James Ragan, director of wealth management research at D.A. Davidson. "We are still kind of in a position where the bad news can be good news," said Ragan. The narrative still holds, "but sometimes it doesn't always hold on a day to day basis," said Ragan.

The Federal Reserve may view the falling job openings as a sign that "the mismatch between supply and demand of labor is slowly resolving, meaning less potential inflation pressure," said Mark Hamrick, senior economic analyst at Bankrate.

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It remains unclear if the stock market's recent rally can hold. While stocks posted strong gains at the end of first quarter, "when you look below the surface, it wasn't as broad-based as the overall indexing," Ragan said.

"The average companies are not doing as well as the large cap leaders. So that tells us the leadership has narrowed a bit in recent weeks, with really these mega capitalization technology sector companies leading the way," Ragan said in a call. "That makes us a little nervous about how sustainable the rally would be."

What's more, it's been nearly a month since Silicon Valley Bank and Signature Bank suddenly shuttered, but Jamie Dimon, chief executive at JPMorgan Chase & Co. said the banking sector crisis is not done. Dimon emphasized though in his annual shareholder letter that "recent events are nothing like what occurred during the 2008 global financial crisis (which barely affected regional banks)."

While investors keep an eye on banks, they are weighing new dynamics in the oil markets after OPEC+ members announced surprise production cuts which pushed oil prices higher on Monday, while they slightly pulled back Tuesday.

Investors are expecting comments from Cleveland Fed President Loretta Mester due 6 p.m. Mester is not a voting member of the Fed's benchmark interest rate committee.

A week shortened for the Good Friday holiday, which will close the U.S. stock market on April 7, is encouraging investors to sit on their hands, but the March nonfarm payrolls report will still be published on that day, and traders will be wary of being badly positioned and not able to immediately react.

Next week also sees the start of the first-quarter corporate-earnings season, possibly another reason for caution.

Companies in focus

-- Steve Goldstein contributed to this article.

-Frances Yue

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04-04-23 1644ET

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