Dow Jones Industrial Average Drops As US Jobs Data Hints At Slowdown

This story was updated at 4:40 p.m. EST.

U.S. markets closed down Wednesday after a two-day rally was checked by data showing modest U.S. jobs growth in October. Meanwhile, U.S. Federal Reserve Chair Janet Yellen hinted there’s a “live possibility” of a rate takeoff next month.

Monthly data released Wednesday by payroll processor ADP and Moody's Analytics said U.S. private businesses added 182,000 jobs in October, slightly better than the FactSet forecast of 180,000. The data indicate a slowdown in hiring in the U.S., down 21 percent from October 2014. The average hiring rate for the last three months of last year was 263,000.

The Dow Jones Industrial Average (INDEXDJX:.DJI) closed down 50.57 points, or 0.28 percent, to 17,868 in midday trading Wednesday. The S&P 500 index (INDEXSP:.INX) dropped 7.48 points, or 0.35 percent, to 2,102. The Nasdaq composite (INDEXNASDAQ:.IXIC) fell by 2.65 points, or 0.05 percent, to 5,142.

Eight of the 10 S&P 500 sectors closed down Wednesday morning led by energy, materials and consumer discretionary goods. Merck & Co., Inc. (NYSE:MRK) shares led Dow 30 company gains Wednesday while UnitedHealth Group Inc. (NYSE:UNH) led declines.

Testifying before the House Financial Services Committee on Wednesday, Federal Reserve Chari Janet Yellen gave one of the most strongly worded signals that the U.S. would begin pushing interest rates upward next month for the first time in nearly a decade. In a speech lauding the Fed’s efforts to avoid future bank failures, Yellen said a “very gradual” rate liftoff was a “live possibility” after the next meeting of Federal Reserve governors on Dec. 15-16.

The hike would gradually raise the cost of borrowing, affecting everything from business loans to credit card interest rates.

Major Global Markets

Asian stocks rallied Wednesday, led by Tokyo’s Nikkei, which emerged from a one-day holiday amid some positive momentum from Japan Post’s highly anticipated market debut and a positive outlook for Nissan Motor, the country’s third-largest automaker. The Nikkei gained 243.67 points, or 1.30 percent, to 18,927. China’s markets rallied after the Chinese central government unveiled a five-year plan to stimulate the economy. The Shanghai Composite Index gained 142.94 points, or 4.31 percent, to 3,460 while Hong Kong’s Hang Seng advanced 485.14 points, or 2.15 percent, to 23,054.

Europe’s markets were mixed after the European Central Bank hinted at further economic stimulus measures. France’s CAC 40 closed up 12.11 points, or 0.25 percent, to 4,948 points in afternoon trading. Germany’s DAX was down 105.91 points, or 0.97percent, to 10,845. London’s FTSE advanced 29.27 points, or 0.46 percent, to 6,413.

Oil Prices

Oil prices fell after U.S. inventory data showed a sixth consecutive weekly rise. West Texas Intermediate crude, the U.S. benchmark for oil prices, retreated by 2.84 percent to $46.54 per barrel for December delivery on the New York Mercantile Exchange. On the London ICE Futures Exchange, Brent crude, the global benchmark for oil prices, lost 3.46 percent to $48.79.

Q3 Earnings-Season: Wednesday Market Movers

Time Warner Inc. (NYSE:TWX) said before markets opened in New York on Wednesday it increased revenue to $6.57 billion in the July-September quarter, up from $6.24 billion in the same period last year. Net income increase from $967 million, or $1.11 per share, to $1.04 billion, or $1.26 per share. New York-based media and entertainment company beat its adjusted revenue forecast on strong performances from its entertainment units, including HBO. The company’s share price dropped 6.55 percent to $72.25 Wednesday. The company has lost nearly 15.49 percent since the start of the year over broader concerns that consumers are shifting to on-demand streaming.

Michael Kors Holdings Ltd. (NYSE:KORS) announced Wednesday morning an increase in sales revenue in the July-September quarter, to $1.13 billion from $1.06 billion in the same period last year. Net profit dropped from $207 million to $193 million, but earnings per share increased by a penny, to $1.01. The British luxury accessories, footwear and apparel company beat profit expectations. Company shares rallied Wednesday by 8.27 percent to $42.57 on the earnings beat. But like other luxury goods makers, a strong dollar and drop in China demand has better shares, in Michael Kors’ case by nearly 43.3 percent since the start of the year.

Lumber Liquidators Holdings Inc. (NYSE:LL) reported Wednesday morning a drop in earnings and profit. The Virginia-based largest U.S. seller of wood flooring was hit over the last year with two scandals, one involving formaldehyde-emitting Chinese laminate flooring and another involving Russian wood products harvested illegally by a supplier. July-September sales dropped to $236.1 million from $266.1 million in the same period last year. Net income retreated from $15.7 million, or 58 cents per share, to a loss of $8.5 million, a loss of 31 cents per share. Stores sales dropped on the scandals and losses were wider than expected, but shares rallied Wednesday, by 9.98 percent to $15.65, on the hope the worst is behind the company whose stock has lost 76.4 percent since the start of the year.

Tesla Motors Inc. (NASDAQ:TSLA) announced Tuesday after markets closed that it increased revenue in its July-September period, to $1.24 billion from $932.5 million in the same period last year. Net losses widened, from $74.7 million to $229.9 million as the company invests heavily on various fronts, including the construction of the world’s largest single lithium ion battery factory in Nevada and a global network of company-owned retail stores. The Silicon Valley luxury electric car manufacturer’s share price rallied by 11.17 percent Wednesday, to $231.63, as bullish investors looked to the company’s record number of cars produced in the quarter as a sign Tesla is beginning to ramp up its factory capacity. Tesla’s shares have gained 4.15 percent for the year.

Etsy Inc. (NASDAQ:ETSY) posted its July-September earnings statement after markets closed Tuesday. It’s the third earnings report since the company went public in April. The Brooklyn-based online marketplace for consumer-made crafts, jewelry, stationery and other goods posted earnings of $65.7 million, up from $47.6 million in the same period last year. The company posted a loss of $6.9 million, compared with a loss of $6.3 million last year. Despite reporting user growth of 900,000 in the quarter, investors sold the stock because the company missed Wall Street’s revenue forecast. Etsy’s shares dropped 9.66 percent to $9.97 Wednesday. The company’s shares are down 66.77 percent for the year.

Zillow Group Inc. (NASDAQ:ZG) said Tuesday after markets closed it increased July-September revenue from $88.7 million last year to $176.8 million in the past quarter. The Seattle-based online real estate information services provider reported a wider loss of $26.1 million, a loss of 15 cents per share, from $16.0 million last year, a loss of 13 cents per share. Zillow’s shares dropped 6.97 percent to $28.83 on Wednesday. The company’s shares are down 77.03 percent for the year.

Herbalife Ltd. (NYSE:HLF) announced Tuesday after markets closed that its revenue for the July-September quarter dropped to $1.1 billion from $1.3 billion in the same period last year. The Cayman Islands-based multilevel marketer of nutritional products said net profit increased from $11.25 million, or 13 cents per share, to $93.6 million, or $1.09 per share, in the same period of time. The company missed revenue forecasts but beat on profit. Herbalife shares dropped 3.34 percent Wednesday, but its price is up 48.28 percent for the year.