Dow pares losses, still plunges over 300 points as hot jobs data stokes rate hike fears

Wall Street’s main indexes tumbled on Thursday in a broad selloff after data showing a strong labor market boosted bond yields and fanned fears the Federal Reserve will be aggressive in raising interest rates.

The Dow Jones Industrial Average, which had plummeted 500 points earlier, fell 366.38 points, or 1.1%, to 33,922.26. The Nasdaq and S&P 500 each dropped 0.8%.

Private payrolls increased more than expected in June, the ADP National Employment report showed, indicating the labor market remained strong despite growing risks of a recession from higher interest rates.

Another survey showed the number of Americans filing new claims for unemployment benefits increased moderately last week.

“We don’t see any softening in the labor market,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “The Fed doesn’t have to worry about the jobs market. When you look at their mandate, they have no reason not to keep hiking and to keep hiking for a while.”

Money market traders now see a near 95% chance of a quarter-point hike at the bank’s next meeting on July 26, up from 90.5% earlier in the day, according to CME’s Fedwatch tool.

Dallas Fed President Lorie Logan, a voting member of the Fed’s rate-setting committee, said Thursday “it would have been entirely appropriate” to raise rates at the June policy meeting itself.

Meta Platforms fell 0.8% as it took aim at Twitter with its Threads app that attracted millions of users within hours of its launch on Wednesday.

Stock indexes had slipped in the previous session after the Fed minutes showed a vast majority of the policymakers expected further policy tightening, even as they agreed to hold rates steady in June.

Second-quarter corporate reports will arrive in the coming weeks with S&P 500 earnings expected to fall 5.7% from the year-ago period, according to Refinitiv data.

“You have a situation where rates are going higher, profits are not really moving,” said King Lip, chief strategist at Baker Avenue Wealth Management. “That’s usually not a good combination for stocks.”

Among other movers, chipmakers Qualcomm and Intel extended declines, dropping 1.6% each, as the trade war between Beijing and Washington escalated after China restricted exports of metals used in semiconductors on Monday.

Meanwhile, Treasury Secretary Janet Yellen began her four-day visit to Beijing amid skepticism over a productive outcome.

Exxon Mobil eased 3.7% on signaling a sharp drop in second-quarter operating profit on lower natural gas prices and weaker oil refining margins, according to a regulatory filing.

JetBlue Airways fell 7.2% after the company said it would follow a US judge’s May order to end an alliance with American Airlines to protect a planned $3.8 billion purchase of Spirit Airlines.