Snap Judgment

By Alex Eule  |  Wednesday, August 31

Jobs in Focus. Stocks fell for a fourth consecutive day on Wednesday after another early morning rally fizzled. The negativity returned in August. The S&P 500 was down 4.2% on the month, as interest rates rose on renewed worries about continued Fed hikes. The 10-year Treasury yield closed August at 3.13%; the yield is now up in 10 of the last 13 months. 

The tech-heavy Nasdaq Composite fell 0.6% on the day, as another tech company declared trouble ahead. Snap, the parent of social media network Snapchat, said it was cutting 20% of its workforce.

"Unfortunately, given our current lower rate of revenue growth, it has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses," co-founder and CEO Evan Spiegel said in a letter to employees. Investors cheered the cost cutting efforts, sending Snap shares up 8.6% on the day.

The job market remains in focus, as more companies, particularly once hot tech startups, talk about layoffs. Today's employment report from ADP, which was just reworked with a new methodology, showed a lower-than-expected 132,000 new jobs in August (versus a 275,000 forecast). The U.S. Labor Department releases its jobs report on Friday.

Barron's Ben Levisohn writes that investors have grown accustomed to a disconnect between the two jobs reports. Today's data from ADP represent a new effort from the payroll processor to better track the job market. 

"Our data suggests a recent shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy's conflicting signals," ADP Chief Economist Nela Richardson said in a press release. "We could be at an inflection point, from super-charged job gains to something more normal."

From an inflation perspective, the good news is that wage growth according to ADP has been holding steady at 7.6%. 

Economists expect the government's jobs report on Friday to show a nonfarm payrolls gain of 300,000, with the unemployment rate holding at 3.5%. 

For stocks, it's unlikely to get easier from here, though. September is historically the worst-performing month for U.S. equities. Going back to 1928, the S&P 500 is down an average of 1% in September. Barron's Jacob Sonenshine has more here on stocks' September struggles. 

DJIA: -0.88% to 31,510.43
S&P 500: -0.78% to 3,955.00
Nasdaq: -0.56% to 11,816.20

The Hot Stock: Meta Platforms +3.7%
The Biggest Loser: PVH Corp. -10.5%  

Best Sector: Communication Services +0.2%
Worst Sector: Materials -1.2%