Stocks give up initial gains as traders struggle to gain ground in 2023

NewEdge's Cameron Dawson says markets need Fed support before rally kicks in

Stocks were volatile and interest rates slipped on Wednesday as investors digested key employment and manufacturing data ahead of the release of the Fed minutes.

The Dow Jones Industrial Average fell 35 points, or 0.11%, after the two economic reports, erasing earlier gains. The S&P 500 also reversed earlier gains but was still up 0.2%. The Nasdaq Composite fell 0.31%. Microsoft shares fell more than 5 percent after the UBS downgrade, weighing on the broader market.

The November Job Openings and Labor Turnover report (JOLTS) came in slightly better than expected, pointing to continued strength in the labor market amid central bank rate hikes to curb inflation. On the other hand, the ISM manufacturing index showed that the sector contracted after a 30-month expansion, suggesting that rate hikes may be slowing the economy.

Still, investors struggled to find a clear direction ahead of more economic data, including the minutes of the Federal Reserve meeting due later on Wednesday and the December jobs report on Friday.

“It’s a wait-and-see mode,” said Art Hogan, chief market strategist at B. Riley Financial. “Investors are always going to be concerned about putting money in after a year that has been pretty bad in every way, and we saw that in real time at least the first two sessions.”

U.S. stocks started 2023 on a downbeat note on Tuesday, as heightened interest rate concerns, high inflation and recession fears dashed hopes on Wall Street to start the new year on a positive note. The S&P 500 and Nasdaq Composite fell 0.4% and 0.8%, respectively, while the Dow closed just below breakeven. The major indexes were also pressured by sharp losses in Apple and Tesla shares.

Ed Moya, senior market analyst at Oanda, wrote in a note to clients on Tuesday: “With restrictive policies and recession fears still in focus for investors, U.S. stocks were unable to hold onto early gains. Some gains.” “Discount buying sparked another bear market rally, but it didn’t last long.”

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