Stocks fall despite strong jobs data; Nasdaq sheds 1% as tech shares sink

Stocks ended lower on Thursday as investors digested a better-than-expected prints on the labor market, as well as a report that President Joe Biden would be open to revising his proposal to increase the corporate tax rate.

[Click here to read what’s moving markets heading into Friday, June 4]

The Washington Post reported that Biden was reconsidering his previous proposal to raise the corporate tax rate to 28% from 21%, which had been seen as a major roadblock to winning Republican support for his infrastructure plans. Instead, he would recommend a minimum corporate tax rate of 15%, according to the news outlet. 

Meanwhile, investors considered a handful of stronger-than-expected reports on the state of the labor market in the U.S. ADP posted its closely watched report on private payroll changes for May Thursday morning, which showed a better than expected 978,000 jobs were added back last month versus the 650,000 expected. And the Labor Department’s report on new weekly unemployment claims showed that new filings broke below 400,000 for the first time since March 2020, with fewer individuals becoming newly unemployed as more areas of the economy reopen.

Both reports set the stage for the Labor Department’s May jobs report out Friday morning, which will be instrumental in determining the strength of the economic recovery and suggesting whether the Federal Reserve might soon be due to taper its crisis-era asset purchase program. April’s sharply disappointing jobs report – with a paltry 266,000 jobs added back while 1 million had been expected – served as fuel for the Fed to stay on hold with current policies. But this stance could be undercut by a marked improvement in data, some pundits noted.

“The May employment numbers are really very important,” Steven Blitz, TS Lombard U.S. economist, told Yahoo Finance. “That’s really going to set in the market’s mind whether or not the Fed announces a taper at the end of July or whether it’s at some later date.”

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Other pockets of the market have also garnered considerable attention. The so-called “meme stocks,” or stocks that have become popular on the Reddit forum r/wallstreetbets, gave back gains in early trading after rallying strongly on Wednesday. Shares of AMC Entertainment Holdings (AMC) recovered losses after sinking earlier in the day, following an announcement that the company planned to sell another nearly 12 million shares. The resurgence in retail investor interest also lifted shares of other meme stocks including Naked Brand Group (NAKD) and BlackBerry (BB).

“I don’t know if it’s so much a threat to the market. It’s more of a learnings experience,” Ryan Nauman, Zephyr market strategist, told Yahoo Finance of the recent surge in meme stocks. “This is no longer our grandparents’ or our parents’ stock market. Now, investment professionals, they might need to start looking at alternative data sets, rethinking their investment theses to consider this growing cohort of retail investors.”

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4:03 p.m. ET: Stocks fall despite strong jobs data; Nasdaq sheds 1% as tech shares sink

Here were the main moves in markets as of 4:03 p.m. ET:

• S&P 500 (^GSPC): -15.26 (-0.36%) to 4,192.86

• Dow (^DJI): -23.34 (-0.07%) to 34,577.04

• Nasdaq (^IXIC): -141.82 (-1.03%) to 13,614.51

• Crude (CL=F): +$0.02 (+0.03%) to $68.85 a barrel

• Gold (GC=F): -$36.80 (-1.93%) to $1,873.10 per ounce

• 10-year Treasury (^TNX): +3.4 bps to yield 1.6250%

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2:01 p.m. ET: Stocks trade mixed

Here’s where markets were trading Thursday afternoon:

• S&P 500 (^GSPC): -8.83 (-0.21%) to 4,199.29

• Dow (^DJI): +33.13 (+0.1%) to 34,633.51

• Nasdaq (^IXIC): -106.24 (-0.77%) to 13,649.85

• Crude (CL=F): -$0.22 (-0.32%) to $68.61 a barrel

• Gold (GC=F): -$36.20 (-1.9%) to $1,873.70 per ounce

• 10-year Treasury (^TNX): +3.4 bps to yield 1.625%

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10:22 a.m. ET: Service sector expansion hits record high in May: ISM 

The Institute for Supply Management’s May services purchasing managers’ index increased more than expected, with reopening activity helping lift the sector hard-hit by the pandemic last year.

The ISM services index for May rose to 64.0 in May from 62.7 in April. This topped estimates for an increase to 63.2, according to Bloomberg data. It also marked the highest level on record, based on ISM data going back to 1997. Readings above the neutral level of 50.0 indicate expansion.

However, as had been seen in the ISM manufacturing index released earlier this week, the report Thursday also noted that labor and materials shortages were capping expansion in the services sector. 

“The rate of expansion is very strong, as businesses have reopened and production capacity has increased,” Anthony Nieves, chair of the Institute for Supply Management, said in a press statement. “However, some capacity constraints, material shortages, weather-related delays, and challenges in logistics and employment resources continue.” 

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10:10 a.m. ET: Retail investor participation ‘has been absolutely key to driving the market’: Strategist

Retail trader participation has been one of the key tenets underpinning the stock market’s rally off of the March 2020 lows, according to some strategists. 

“Since the bottom in the equity markets last March, the role of the retail investor more broadly basically has been absolutely key to driving the market, explaining its resilience, explaining elevated [volatility] because a lot of participation is basically happening through the options market,” Binky Chadha, Deustche Bank chief global strategist, told Yahoo Finance on Thursday. “But our view has basically been that this is all really about immobility at home and working from home leads to basically trading from home. This has been happening in the U.S., but it’s also been happening elsewhere across the world.” 

However, their participation may start to dwindle once more individuals go back to work in person, and time at home for trading becomes more scarce.

“P
articipation of the retail investor in U.S. equities has very, very closely followed inversely the COVID timeline. So one of my favorite charts is looking at an Apple mobility index for the U.S., you invert it, and you overlay whatever your favorite measure of retail participation is … and there is a very striking correlation,” Chadha added. “So I would argue that the participation is following this … and the thesis is that as markets reopen, retail participation is going to come down.” 

“We tend to think of it as a flash in the pan as opposed to a change in the trend,” he concluded.

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9:30 a.m. ET: Stocks trade lower despite ADP, jobless claims beats

Here’s where markets were trading shortly after the opening bell Thursday morning:

• S&P 500 (^GSPC): -21.34 (-0.51%) to 4,186.78

• Dow (^DJI): -144.36 (-0.42%) to 34,456.02

• Nasdaq (^IXIC): -110.49 (-0.8%) to 13,645.83

• Crude (CL=F): +$0.13 (+0.19%) to $68.96 a barrel

• Gold (GC=F): -$30.70 (-1.61%) to $1,879.20 per ounce

• 10-year Treasury (^TNX): +1.2 bps to yield 1.603%

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8:33 a.m. ET: New jobless claims fall more than expected to new 14-month low 

Weekly jobless claims tumbled to a new pandemic-era low, with the number of individuals newly unemployed slowing further during the recovery. 

Initial jobless claims for the week ended May 29 came in at 385,000, or just a tick below the 387,000 expected. The prior week’s new claims were revised down by 1,000 to 405,000. However, for the week ended May 22, continuing claims totaled 3.771 million, which were higher than the 3.614 million expected and the prior week’s 3.602 million. 

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8:15 a.m. ET: Private payrolls surged by 978,000 in May, topping estimates: ADP 

Private payrolls rose far more than expected last month, with some of the industries hardest-hit by social distancing requirements making strides to recover jobs as the economy emerges from the pandemic.

U.S. private employers added back 978,000 payrolls last month, ADP said in its closely watched monthly jobs report on Thursday. This followed a downwardly revised rise of 654,000 in April. Consensus economists were looking for private payrolls to increase by 650,000 in May, according to Bloomberg data.

By sector, service-providing employers again added the most jobs by far last month at a net 850,000. Leisure and hospitality jobs increased by 440,000, and education and health services employment rose by 139,000 in May. Trade, transportation and utilities jobs also increased by a strong 118,000. Information industry employers were the only ones to shed jobs on net last month, with these ticking down by 3,000.

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7:30 a.m. ET Thursday: Stock futures fall

Here’s where markets were trading ahead of the opening bell:

• S&P 500 futures (ES=F): 4,178.00, -28.25 points (-0.67%)

• Dow futures (YM=F): 34,398.00, -192.00 points (-0.56%)

• Nasdaq futures (NQ=F): 13,548.00, -125.75 points (-0.92%)

• Crude (CL=F): -$0.10 (-0.15%) to $68.73 a barrel

• Gold (GC=F): -$15.70 (-0.82%) to $1,894.20 per ounce

• 10-year Treasury (^TNX): +1.2 bps to yield 1.603%

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6:16 p.m. ET Wednesday: Stock futures edge higher

Here’s where markets were trading Wednesday evening:

• S&P 500 futures (ES=F): 4,207.25, +1 point (+0.02%)

• Dow futures (YM=F): 34,592.00, +2 points (+0.01%)

• Nasdaq futures (NQ=F): 13,683.50, +9.75 points (+0.07%)

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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