Stocks opened lower Wednesday but shot into positive territory mid-morning as investors took in an onslaught of economic reports. The main indexes were just as choppy in afternoon trading following a lunchtime speech from Federal Reserve Chair Jerome Powell.
Ahead of the open, ADP said private employers added 184,000 jobs in March. This was the biggest increase since July and blew past economists’ forecasts for 148,000 new jobs. The data also showed that annual pay increases for job-stayers was 5.1% and 10.0% for job-changers.
“Employers accelerated their rate of snatching up workers in March and continued to increase the size of paychecks, underscoring that labor market conditions remain robust,” says José Torres, senior economist at Interactive Brokers.
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The Institute of Supply Management’s Services Purchasing Managers Index (PMI), meanwhile, slipped 1.2% in March to 51.4%. While this does signal a slower pace of growth in the services industry, it remained above the 50 level that indicates expansion.
More notable was the drop in the Prices Index, which fell 5.2% to 53.4% in March. If the Prices Index keeps trending lower, this could “be supportive of a more confident Fed” over the next several months, says Eugenio Alemán, chief economist at Raymond James.
Powell sticks to data-dependent script
Fed Chair Jerome Powell reiterated the central bank’s data-dependent approach to interest rates Wednesday in an early afternoon speech at Stanford University. “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%,” Powell said in prepared remarks.
And given how strong the economy remains and how far inflation has fallen, the Fed has time “to let the incoming data” guide its policy decisions, the chairman added. However, Powell did say that rate cuts will likely be appropriate “at some point this year.”
Intel sinks on Foundry segment profit warning
Intel (INTC) was the worst Dow Jones stock today, slumping 8.2% after the chipmaker said its Foundry division – which houses its chipmaking segment – lost $7 billion in 2023, more than the $5.2 billion it lost the year prior.
The company also said it anticipates losses in the semiconductor manufacturing business to peak later this year and it expects operating margins to break even “midway between now and the end of 2030.”
UBS Research analyst Timothy Arcuri maintained a Neutral (Hold) rating on INTC after the company’s financial update. “We remain sober as so much of the profitability improvement is parked in the 2027+ timeframe,” Arcuri wrote in a note to clients.
And while the company sounds confident on growing its external customer base, “it appears even in 2030 that Intel will still be a ~75% customer of Intel Foundry – making us question how much value the market would ever ascribe to this as a potential standalone asset,” Arcuri adds.
Disney prevails over Peltz in proxy battle
Walt Disney (DIS) was another struggling blue chip stock, shedding 3.1% after shareholders approved the company’s entire slate of board nominees – which did not include Nelson Peltz.
The activist investor’s asset management firm Trian Partners staged a proxy battle against the media and entertainment company, accusing it of having a “spaghetti-against-the-wall ‘plan'” that is not creating value for DIS shareholders.
“With the distracting proxy contest now behind us, we’re eager to focus 100% of our attention on our most important priorities: growth and value creation for our shareholders and creative excellence for our consumers,” said Disney CEO Bob Iger in a press release.
As for the main indexes, the Dow Jones Industrial Average closed down 0.1% at 39,127. The S&P 500 (+0.1% to 5,211) and the Nasdaq Composite (+0.2% at 16,277) managed to hold on for wins.
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