US stocks trod water yesterday after the previous day’s massive gains, but traders worried that recent strong data could set the market up for a sell-off should today’s jobs report fall short of hopes.
Both the Dow and the S&P 500 dipped and the Nasdaq ended with a slight gain following Wednesday’s rally of more than four per cent on an agreement from central banks to provide cheap dollar loans to struggling European banks.
Sentiment was underpinned by stronger-than-expected figures on US factory activity, which came one day after private-sector payroll data also exceeded forecasts. Further gains could be sparked by a significant jump in November payrolls.
“At this point in time we are definitely building for a better payrolls number,” said David Lutz, a trader at Stifel Nicolaus Capital Markets in Baltimore.
The US economy is expected to have added 122,000 jobs in November. Some investors think even a number slightly better than that from the Labor Department won’t be enough to justify more buying.
“I can’t believe people are getting excited about 150,000 (new jobs) four years into this economic malaise,” said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.
Despite the importance of the payrolls figure, the market will still focus on the borrowing costs of Eurozone nations. Spanish and French government bond yields fell after well-bid auctions yesterday, but relief may be brief with no solution for the Eurozone’s debt crisis in sight.
The financial sector, the strongest gainer on Wednesday, gave back some of its gains. The S&P’s financial index slid 0.95 per cent.
“Until there’s a proper resolution among European policy makers, wild fluctuations in equity markets will continue forward,” Morganlander said.
The Dow Jones industrial average fell 25.65 points, or 0.21 per cent, to 12,020.03. The S&P 500 lost 2.37 points, or 0.19 per cent, to 1,244.59. The Nasdaq Composite gained 5.86 points, or 0.22 per cent, to 2,626.20.
All three indices climbed more than four per cent in Wednesday’s broad rally on heavy volume, with the Dow industrials gaining almost 500 points.
In the latest better-than-expected data, the pace of growth in the US manufacturing sector picked up in November to its strongest since June and new orders rose, according to the Institute for Supply Management.