Dow falls nearly 400 points after strong jobs data signals Fed likely to stay in hiking mode

Stocks fell Thursday after jobs data showed the labor market is still strong amid the Federal Reserve’s interest rate hikes to tame inflation.

The Dow Jones Industrial Average fell 393 points, or 1.19%. The S&P 500 and Nasdaq Composite slipped 1.19% and 1.39%, respectively, led by shares of Tesla, down more than 3%.

Stocks opened lower after the ADP private payrolls report showed that employers added 235,000 jobs in December, well above economist estimates. Wages also increased more than anticipated, another sign that the labor market remains hot. Later in the morning, weekly jobless claims came in below expectations and showed a drop in continuing claims.

“While we will get a better overall picture of the jobs market tomorrow, private payrolls beating expectations and jobless claims coming in below are indications that the labor market remains resilient,” said Mike Loewengart of Morgan Stanley Global Investment Office.

“These come on the heels of big-name companies announcing sizable job cuts so there is no doubt the market’s pressures are weighing on companies, but it remains to be seen when hiring will slow demonstrably,” he added.

The moves follow a choppy trading session as traders pored over a mixed bag of economic data.

November’s Job Openings and Labor Turnover, or JOLTS, report showed the job market remained strong, bolstering concerns that the Fed could continue raising interest rates as long as there remained a hot market for workers. But the ISM manufacturing index showed the sector was contracting.

On Friday, investors will review the December jobs report for updated data on employment and hourly wages. Since the report could have a big impact on the Fed’s next moves, it has the potential to impact the market. Investors don’t want to see big gains in wage growth, which could signal higher inflation.

Correction: A previous version misspelled Loewengart’s last name.