By Herbert Lash, Ankika Biswas and Bansari Mayur Kamdar
(Reuters) – Wall Street stocks slid on Wednesday, ending the biggest two-day rally since 2020, after data showed U.S. labor demand remained strong and as Federal Reserve officials stuck to their hawkish message that interest rates will stay higher for longer.
U.S. private employers stepped up hiring in September, the ADP National Employment report on Wednesday showed, suggesting rising rates and tighter financial conditions have yet to curb labor demand as the Fed battles high inflation.
The Institute for Supply Management’s services industry employment gauge shot up in another sign labor remains strong as the overall industry slowed modestly in September.
The Fed is expected to deliver a fourth straight 75-basis-point rate hike when policymakers meet Nov. 1-2, the pricing of fed fund futures shows, according to CME’s FedWatch tool.
Inflation is problematic, San Francisco Fed President Mary Daly told Bloomberg TV in an interview in which she did not alter the Fed’s message.
“The path is clear: we are going to raise rates to restrictive territory, then hold them there for a while,” she said. “We are committed to bringing inflation down, staying course until we are well and truly done.”
The benchmark rose 5.7% Monday and Tuesday as Treasury yields slid sharply on softer U.S. economic data, UK’s turnaround on proposed tax cuts and Australia’s smaller-than-expected rate hike.
But Treasury yields rebounded on Wednesday after the economic data failed to bolster budding hopes the Fed might pivot to a less hawkish policy stance.
“This is a very temporary blip in the market,” Johan Grahn, head of ETF strategy at Allianz (ETR:) Investment Management LLC, said about the two-day rally.
“I don’t see that changing the Fed’s path,” Grahn said. “They’re not going to let the early signs of inflation peaking scare them into a pivot or even a conversation about a pivot.”
The Labor Department will release a more comprehensive and closely watched employment report for September on Friday.
Rate-sensitive technology and related stocks like Nvidia (NASDAQ:) Corp, Amazon.com Inc (NASDAQ:), Apple Inc (NASDAQ:) and Alphabet (NASDAQ:) Inc fell.
At 2:34PM ET, the fell 62.55 points, or 0.21%, to 30,253.77, the S&P 500 lost 12.38 points, or 0.33%, at 3,778.55 and the dropped 65.50 points, or 0.59%, to 11,110.90.
Nine of the 11 major S&P 500 sectors declined, with utilities and real estate leading losses.
The energy sector jumped 2.0% after the Organization of the Petroleum Exporting Countries and allies agreed to cut oil production the deepest since the COVID-19 pandemic began, curbing supply in an already tight market.
Healthcare also rose.
Twitter Inc (NYSE:) lost momentum in line with its peers, a day after surging 22% on billionaire Elon Musk’s decision to proceed with his original $44-billion bid to take the social media company private.
Twitter fell 0.8% and Tesla (NASDAQ:) Inc, the electric-car maker headed by Musk, slid 4.6%.
The S&P 500 posted two new 52-week highs and nine new lows; the Nasdaq Composite recorded 33 new highs and 110 new lows.