There was plenty for investors to consider Thursday, including a pair of updates on the labor market and speculation of a potential bankruptcy for one of Wall Street's most embattled retailers. Market participants were clear that they didn't like any of what they were seeing, sending stocks lower once again.
Ahead of today's opening bell, the Labor Department said that weekly jobless claims fell by 19,000 to 204,000 in the final week of 2022, more than economists were expecting. Continuing claims also edged lower, down 24,000 to 1.7 million.
Additionally, a report released by ADP showed the private sector added 235,000 jobs in December. Not only was this more than the 182,000 private payrolls created in November, but it outpaced economists' consensus estimate for 153,000 new jobs.
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Both data points underscore an extremely tight labor market – a sticking point for the Federal Reserve in its fight against inflation. Complicating matters, the numbers come ahead of tomorrow's highly anticipated December jobs report (more on this below).
The jobs data followed layoff announcements from several large corporations. Among the most recent to unveil cuts were Amazon.com (AMZN, -2.4%), which announced the passing out of 18,000 pink slips, and Stitch Fix (SFIX, +9.4%), which pledged to reduce salaried headcount by 20%.
In other single stock news, Bed Bath & Beyond (BBBY) spiraled 29.9% after the home goods retailer fueled bankruptcy speculation following a business update. BBBY said it expects to report a net loss of $385.8 million in its fiscal third quarter and anticipates a year-over-year drop in sales due to "lower customer traffic and reduced levels of inventory availability." Additionally, Bed Bath & Beyond said it has "substantial doubt" about its ability to continue as a going concern, given "recurring losses and negative cash flow from operations." The firm is exploring strategic alternatives, including selling assets or filing for bankruptcy.
As for the major market indexes, the Dow Jones Industrial Average shed 1.0% to 32,930, the S&P 500 gave back 1.2% to 3,808, and the Nasdaq Composite fell 1.5% to 10,305.
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Trepidation around tomorrow's jobs report is building, especially in wake of today's economic reports and Wednesday's Fed minutes in which the central bank reiterated support for a "restrictive policy stance" in order to bring down inflation.
"As we wait for tomorrow's jobs report, there is a lot of angst in the air," says Brad McMillan, chief investment officer for Commonwealth Financial Network. "One of the most predicted recessions in history is very likely to hit this year. The manufacturing business sentiment survey yesterday was down, seemingly confirming that outcome. The Fed is looking to substantially weaken the labor market, in search of lower inflation, and according to the meeting notes released yesterday, is going to keep raising rates until that happens."
And while all signs suggest that the labor market will weaken significantly, little to no movement on that front was likely made in December. The consensus estimate, McMillan adds, is for the economy to have added 200,000 jobs last month, modestly lower than what we've seen in recent months, but still strong growth.
This keeps the potential for volatility high – but also serves as a lesson for market participants that investing is a marathon, not a sprint. In other words, stay focused on quality names that have the highest probability of riding out the storm. One place to find these companies with staying power is with the best Dow dividend stocks, a collection of blue-chip companies well-positioned to generate income and deliver outperformance in uncertain market times.
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