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The S&P 500 is on track to end Friday with another weekly decline, which would be its fifth consecutive loss, the longest such streak since last spring.

What drives the markets?

Labor market data released Thursday suggests employment is still healthy despite the Fed’s most aggressive interest rate hikes in about four decades and news of massive layoffs at Amazon.com Inc. AMZN, Salesforce Inc. CRM, Genesis Global Trading Inc. and other technology companies.

Private payroll data from ADP showed 235,000 jobs were added in December, beating expectations of 153,000 new jobs, according to economists polled by The Wall Street Journal. The data also showed strong increases in workers’ wages.

Initial jobless claims also fell last week to 204,000, the lowest level since September. Job vacancies data released Wednesday showed more than 10 million U.S. job openings, another sign the labor market remains unperturbed despite Fed rate hikes and corporate layoffs finance and technology.

The reaction of stocks and bond yields was the latest example of the “good news is bad news” dynamic playing out in the markets.

“As long as we’re still in a rate hike cycle, good economic data will be bad news for markets,” Art Hogan, chief market strategist at B. Riley Wealth, said in a phone interview with MarketWatch.

On Friday, investors will receive the monthly December nonfarm payrolls report from the US Department of Labor.

See: US job growth expected to slow to 200,000 in December, but that’s still too much for the Fed

“While we will have a better overall job market picture tomorrow, private payrolls exceeding expectations and unemployment insurance claims falling below are indications that the labor market remains resilient,” said Mike Loewengart. , head of model portfolio construction at Morgan Stanley Global Investment Office. .

Bill Adams, Comerica Bank’s chief economist, expects the December jobs report to show an unemployment rate unchanged on the month at 3.7% and 203,000 non-farm payroll jobs added from November .

“The unemployment rate has been kept low over the past few months by the ‘triple epidemic’ of influenza, Covid and RSV infections, which are keeping potential job seekers out of the labor force and keeping measured unemployment,” he said in emailed comments Thursday. . “The government does not count as unemployed people who are not working but not looking for work because they are ill, caring for sick children or supervising children whose kindergarten is understaffed.”

However, Adams predicts that the unemployment rate will reach around 4.5% by mid-2023, both due to reduced seasonal illnesses and a general slowdown in the economy.

Fed Chairman Jerome Powell said the labor market must weaken to prevent large wage increases for workers from fueling inflation.

Warmongering comments from senior Fed officials also impacted stocks on Thursday.

Kansas City Federal Reserve Chair Esther George spoke on CNBC on Thursday to say she had raised her forecast for the federal funds rate to more than 5% and expects there to be more. remains for some time as the central bank continues its fight against inflation. Meanwhile, Atlanta Fed President Raphael Bostic also said on Thursday that the central bank still has “a lot of work to do” to bring inflation under control.

His comments echoed the hawkish tone of Minneapolis Fed Chairman Neel Kashkari, who shared his outlook in a blog post on Wednesday, as well as the Fed’s December meeting minutes that showed the bank central is generally not satisfied with the response of the markets to its rate. hikes.

St. Louis Federal Reserve Chairman James Bullard said Thursday afternoon that high inflation is expected to recede in 2023. He also acknowledged that while the benchmark rate is not yet in an area that can be considered restrictive enough, it comes close.

Higher bond yields and a strong dollar also weighed on stocks. The yield of the 10-year note TMUBMUSD10Y,
3.717%
rose 6.2 basis points to 3.772%, reversing some of its declines from recent sessions. The ICE US Dollar Index DXY,
+0.78%,
an indicator of dollar strength against a basket of major currencies, gained 0.7% to 104.98.

Companies in the spotlight

• Walgreens Boot Alliance
  WBA,
  -6.55%
  The stock fell 6.8% even after the drugstore chain reported first-quarter earnings that beat analysts’ estimates and raised its full-year revenue outlook in part due to the acquisition of Summit Health by its US healthcare segment.

• Amazon
  AMZN,
  -1.32%
  was off 1.5% after undefined
  announcing the cut of 18,000 jobs, or around 1% of its workforce, becoming the latest tech company to cut after rapidly expanding during the pandemic.

• Silvergate Capital
  AND,
  -40.64%
  fell 41.8% after it said digital asset deposits fell $8.1 billion from Sept. 30 to year-end to just $3.8 billion following the collapse of crypto exchange FTX that sparked a run forcing the bank to sell assets at a steep loss to cover some $8.1 billion in withdrawals. The bank said it was forced to sell $5.2 billion in debt to cover the withdrawals and posted a loss of $718 million in the fourth quarter on that sale.

• Shares of other lenders with ties to the crypto industry also fell, including SVB Financial Group
  SIVB,
  -2.88%
  and Signature Bank
  SBNY,
  -5.35%,
  which fell by more than 3.5% respectively.

• PointFix Inc.
  SFIX,
  +9.38%
  shares rose 8.9% as the company announced plans to cut its salaried workforce by 20%.

— Jamie Chisholm contributed to this article