Dow aims for 3rd record in 2022, but broader stock market struggles ahead of Fed minutes

What are stock benchmarks doing?

• The Dow Jones Industrial Average
  DJIA,
  +0.37%
  rose 90 points, or 0.3%, to 36,891.

• The S&P 500
  SPX,
  -0.13%
  fell 5 points, or 0.1%, to 4,789.

• The Nasdaq Composite Index
  COMP,
  -0.97%
  declined 120 points, or 0.8%, to 15,501.

On Tuesday, the Dow rose 215 points, or 0.6%, to close at a record 36,800, while the S&P 500 fell less than 0.1% and Nasdaq Composite dropped 1.3%.

What’s driving markets

Markets were tilting mostly lower Wednesday morning, with real estate
SP500.60,
-1.66%
and tech
SP500.45,
-0.99%
leading the losses, as investors scooped up energy shares
SP500.10,
+1.18%,
materials
SP500.15,
+1.54%
and financials
SP500.40,
+0.35%
in the early few sessions of 2022.

Wall Street was digesting a report on private payrolls, which showed that 807,000 jobs were created in December, according to the ADP National Employment Report, higher than forecast for a gain of 375,000, based on average estimates from economists surveyed by The Wall Street Journal.

“Jobs, jobs, jobs. Today through Friday, Wall Street will be obsessed with jobs reports and their likely influence of inflation and interest rates,” wrote Sam Stovall, chief investment strategist at CFRA Research, in emailed comments.

Strategists use the ADP report to get an early read on the Labor Department’s report on private payrolls, which are scheduled to be released in about 48 hours. The private-sector report hasn’t been an accurate predictor of the Friday jobs report. However, the ADP report is watched because investors have become more attuned to the health of the jobs market amid the spread of the omicron variant of the coronavirus that causes COVID-19, a disease that has pushed much of the world into an uncertain phase of the pandemic, even if evidence suggests that the illnesses caused by the new strain are milder than other variants.

The labor market and the outlook for inflation are two factors that policy makers at the Federal Reserve will be observing closely as it sets up for the new year.

“Should the jobs report show stronger-than-expected additions (currently estimated at 440k) and a sharp drop in the unemployment rate (now estimated at 4.2%) should put pressure on growth stocks,” Stovall wrote. Economists surveyed by The Wall Street Journal look for nonfarm payrolls to show a December rise of 422,000.

Another important market driver in 2022 has been the move higher in yields, with the 10-year yield
TMUBMUSD10Y,
1.681%
surging over 17 points over the first two trading days of 2021.

Against that backdrop, investors on Tuesday boosted value stocks including in the financial and industrial sector, and shunned technology plays, which are more yield sensitive.

“What is really amazing is the speed and magnitude these names have been taken down, while the major indices are near all time highs,” said Matthew Tuttle, chief investment officer of Tuttle Capital Management, referring to growth stocks.

The minutes from the latest Federal Open Market Committee meeting in December are due at 2 p.m. Eastern Time Wednesday and Tuttle said they could influence the market, given the focus on rising interest rates and higher inflation at the moment.

At the Dec. 14-15 meeting, Fed policy makers agreed to speed the wind-down of the central bank’s monthly asset purchases, and projections issued by the central bank point to as many as three increases to interest rates if tapering of asset purchases is completed in March.

Separately, the final reading of the IHS Markit services purchasing managers index for December came in at 57.6, down from 58 in November but mostly in line from an earlier estimate.

Which companies are in focus?

• The highflying automotive sector also will be in the spotlight, after rallies for Tesla TSLAand Ford Motor Co. F on successive days. General Motors GM is set to release an all-electric Chevy Silverado on Wednesday, while Sony SONY rallied in Tokyo trade after setting up an electric vehicle unit. Shares of GM were down 1.3%, Ford was off 2.5% after a big run-up on Tuesday and Tesla’s stock was marginally higher to flat.

• Shares of Beyond Meat
  BYND,
  +0.24%
  were in focus after said its plant-based fried chicken product is coming to KFC locations in the U.S. next week. Its stock was up 5.2%.

• Boeing Co. shares
  BA,
  +1.54%
  rose 1.7% as the airline industry ordered the aeronautics company’s 737 MAX jet. On Wednesday, the Allegiant Travel
  ALGT,
  -6.79%
  airline, Allegiant Air, ordered 50 MAX jets with an option to purchase 50 more.

How are other assets faring?

• The yield on the 10-year Treasury note TMUBMUSD10Y fell 1.3 basis points to 1.65%, hanging around its highest since late October based on 3 p.m. Eastern Time levels, according to Dow Jones Market Data. Yields and debt prices move opposite each other.

• The ICE U.S. Dollar Index DXY was off 0.4%.

• Gold futures GC00 traded higher, with the February contract rising 0.6% at $1,825.10 an ounce on Comex. West Texas Intermediate crude for February delivery CLG22, the U.S. benchmark, rose $1.32, or 1.7%, to reach $78.36 a barrel on the New York Mercantile Exchange.

• Bitcoin BTCUSD was up around 0.6%.

• The Stoxx Europe 600 SXXP index traded virtually unchanged, while London’s FTSE 100 UKX rose 0.3%.

• The Shanghai Composite SHCOMP declined 1% and China’s CSI 300
  000300,
  -1.01%
  fell 1%, while the Hang Seng Index HSI declined 1.6% in Hong Kong and Japan’s Nikkei 225 NIK edged up 0.1%.