Downbeat economic reports ramped up recession fears Tuesday, putting pressure on stocks throughout the session. While the major market indexes traded higher early on, they gradually headed lower over the course of the day as today's data indicated the Fed's efforts to slow the economy are working.
The Labor Department said this morning that the number of job openings declined to a seasonally adjusted 9.9 million in February from January's downwardly revised 10.6 million. This marked the first time job openings came in below 10 million since May 2021. Still, the latest figure sits close to the record 12 million job openings from February 2022 and far outnumbers the number of unemployed folks looking for work.
"The labor market is starting to loosen as the number of job openings declined in most sectors," says Jeffrey Roach, chief economist for LPL Financial. "As the economy slows, firms will likely cut openings and workers will be less likely to quit in search of better hours and higher pay." Roach adds that the Fed could consider pausing interest rate hikes at its May meeting, but only if this Friday's jobs report "shows signs of material weakness," and the next CPI report "reveals lower inflation."
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In another sign that the Fed's efforts to slow the economy are working, the Commerce Department said earlier that factory orders fell by a more-than-expected 0.7% in February. This was the third time in the last four months that orders for manufactured goods have declined.
Meanwhile, oil prices continued to climb following this weekend's surprise output cut announcement from the Organization of the Petroleum Exporting Countries and its allies (OPEC+). U.S. crude futures rose 0.4% to $80.71 per barrel – their highest close since Jan. 26. However, this boost in energy prices didn't translate to upside for energy stocks. In fact, energy was one of the worst-performing sectors today, giving back 1.8%.
As for the major indexes, the Dow Jones Industrial Average fell 0.6% to 33,402, the S&P 500 shed 0.6% to 4,100, and the Nasdaq Composite closed down 0.5% at 12,126.
As a reminder, it's a short week for investors, with the stock market closed for Good Friday.
Are regional bank stocks a buy?
Even if the U.S. does enter a recession later this year, "consumers would enter it in far better shape than during the great financial crisis," said Jamie Dimon, CEO of JPMorgan Chase (JPM) said in his annual letter to shareholders. The head of the big bank added that consumers are spending 7% to 9% more than they were last year and 23% more than they were before COVID. Overall, Dimon said, the economy is "pretty good," although he admitted there are "storm clouds ahead."
Dimon also chimed in on the banking system following the recent failures of Silicon Valley Bank and Signature Bank. While the crisis "is nothing like 2008," it still "provoked lots of jitters in the market," Dimon said.
Indeed, the SPDR S&P Regional Banking ETF (KRE) is down more than 30% since the start of March. Does this make beaten-down regional bank stocks a buy? Not so fast, say analysts. Yes, there may be plenty of cheap stocks to choose from, but it might be too soon to go bargain hunting.
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