NEW YORK — Wall Street’s weak start to 2024 carried into a third day, and stocks finished mixed on Thursday following reports showing the U.S. job market remains solid, though maybe a touch too strong.
The S&P 500 slipped 16.13, or 0.3%, to 4,688.68 and is on track for its first losing week in the last 10. The Dow Jones Industrial Average eked out a gain of 10.15 points, or less than 0.1%, to 37,440.34, and the Nasdaq composite fell 81.91, or 0.6%, to 14,510.30.
Walgreens Boots Alliance sank 5.1% after it nearly halved its dividend so it could hold onto more cash. That helped overshadow gains for airlines and cruise-ship operators, which recovered some of their sharp losses from earlier in the week. Carnival steamed 3.1% higher, and United Airlines got a 2.4% lift.
U.S. stocks have broadly regressed this week after rallying into the end of last year toward record heights. Critics said the market was due for at least a breather following its big run, which fed on hopes inflation has cooled enough for the Federal Reserve to cut interest rates sharply this year.
Rate cuts give a boost to prices for stocks and other investments, while also relaxing the pressure on the economy and financial system. Treasury yields in the bond market have already eased since autumn on expectations for such cuts, releasing pressure on the stock market.
But Treasury yields rose Thursday following reports showing the job market may be stronger than expected. The economy is in a delicate phase where investors want it to remain solid, but not too hot.
A healthy job market is of course good for workers and stamps out worries about an imminent recession. But too much strength could prod the Federal Reserve to keep interest rates high because it could keep upward pressure on inflation. And the Fed has already hiked its main interest rate to the highest level since 2001.
One report from the U.S. government on Thursday showed fewer U.S. workers filed for unemployment benefits last week than expected. Another from ADP Research Institute said private employers accelerated their hiring last month by more than economists expected.
A more comprehensive report on the jobs market from the U.S. Labor Department will arrive on Friday. Economists expect that to show U.S. hiring slowed to 160,000 jobs last month from 199,000 in November.
“If tomorrow’s numbers show the same kind of strength and the economy keeps rolling along, it’s fair to wonder why the Fed would be in a rush to cut rates,” said Chris Larkin, managing director, trading and investing at E-Trade from Morgan Stanley.
Traders are betting the Federal Reserve will cut interest rates by twice as much this year as the central bank has indicated. Wall Street is also thinking the first cut could come as soon as March, and a stronger-than-expected economy makes such predictions less realistic. Critics had already called them overly aggressive.
A third report from S&P Global said that growth for financial businesses and others in U.S. services industries was a touch stronger last month than expected.
Following Thursday’s data reports, the yield on the 10-year Treasury rose to 3.99% from 3.91% late Wednesday. The yield on the two-year Treasury, which more closely tracks expectations for the Fed, climbed to 4.39% from 4.33%.
Stocks have already rallied in part on expectations for sharp cuts coming to interest rates soon. If the Fed doesn’t cut as deeply and as quickly as expected, prices for stocks and other investments could be in jeopardy.
On Wall Street, Peloton Interactive jumped 13.9% after it announced a partnership to bring its workout content to TikTok.
APA fell 7.3% after it said it will buy Callon Petroleum in an all-stock deal valued at roughly $4.5 billion, including debt. Callon Petroleum gained 2.9%.
In stock markets abroad, indexes were modestly higher in much of Europe and a bit lower in much of Asia.
In Tokyo, the mood was somber as the market reopened from the New Year holidays with a moment of silence after a major earthquake Monday left at least 77 people dead and dozens missing.
Dark-suited officials bowed their heads in a ceremony that usually features women clad in colorful kimonos. Japan’s benchmark Nikkei 225 fell 0.5%.
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