Major stock indices fell sharply on Thursday morning. The June ADP payroll figures surprised investors with the biggest monthly increase since July 2022, stoking fears of further rate hikes.
The ADP private payroll number came in at an unexpected high of 497,000 against the Econoday consensus of 235,000. That compares with a much lower revised number of 267,000 payrolls in May.
June’s increase was led by robust hiring in the leisure and hospitality industries, with 232,000 new openings. Other strong sectors include construction, transportation and utilities.
Initial jobless claims were 248,000 for the week ended July 1, up from an expected 245,000, and higher than the revised 236,000 the previous week. May job postings totaled $9.824 million compared to Econoday’s estimate of 9.9 million.
The 10-year Treasury yield jumped 9 basis points to 4.04%, above the 4% level for the first time since March. The CME FedWatch tool showed more than a 90% chance for a quarter-point hike at the July 26 Fed meeting, higher than Wednesday.
The labor data has given investors more reason to believe the Federal Reserve will raise rates at the July meeting, and possibly longer.
Look for the June jobs report Friday at 8:30 a.m. ET. The June nonfarm payroll estimate is up 213,000 and well below May’s number of 339,000. Private payroll is expected to rise 199,000 from 283,000 in May.
The June services index from the Institute for Supply Management (ISM) rose to 53.9 from 50.8 expected. A reading above 50 for the composite index shows that the services economy is expanding; below 50 indicates that it is contracting.
The main indices lose more than 1%
The Nasdaq fell 1.3% in the first hour of trading. The Dow Jones Industrial Average fell 1.4% and the S&P 500 lost 1.2%. The Russell 2000 fares less well and is down 2%.
The Invesco QQQ Trust ETF (QQQ) followed by the Nasdaq 100 fell 1.2%.
The Innovator IBD 50 ETF (FFTY) fell 2.4%, underperforming equity indices. NYSE and Nasdaq volume was higher from the same time on Wednesday.
Stock market action: stocks give a take profit signal
Parent’s Facebook and Instagram shares Metaplatforms (META) gained 0.5% after launching its rival Twitter product, called Threads, on Wednesday night. The new service quickly gained 10 million registrations.
Meta shares are extended with no clear entry point.
IBD Stock 50 Global-e online (GLBE) jumped 1.2% in volume to an 18-month high, after Piper Sandler raised its price target from 38 to 54 and maintained its overweight rating. The stock is in the 20% profit zone of an indefinite basis with a buy point of 34.82.
The Israel-based e-commerce platform company is currently not profitable, but its losses are shrinking. Global-e Online has produced consistent quarterly sales growth of over 50% for more than eight quarters.
Stock Movers: Gatherings of Restaurant Chains
engineering sports (GENI) saw a gap of more than 12% in huge volume, after the sports betting and media company announced it would extend its multi-year partnership with the National Football League. The stock is above the 5% buy zone of a choppy base with a buy point of 5.82.
Healthy restaurant chain sweetgreen (SG) jumped 5.2% after BofA Securities raised the stock from neutral to a buy rating and raised its price target from 9 to 17.
Keurig Dr Chilli (KDP) rose 1.8% after Morgan Stanley upgraded the beverages stock to overweight from equal weight and maintained its price target of 36. The beverages stock recovered its moving average over 50 days, but remains in a prolonged downturn. His relative strength index is a dismal 19.
HubSpot (HUBS) fell 3.4% after Piper Sandler downgraded the CRM platform to neutral, but raised its price target to 520 from 482.
HUBS fell below its 21-day exponential moving average.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
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