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Dow sheds 200 points as investors digest mixed economic signals, await Powell speech

Investors should focus on stocks with earnings resilience, says Morgan Stanley's Sherry Paul

The Dow Jones Industrial Average fell on Wednesday as Wall Street waded through new economic data and awaited an afternoon speech on the economy from Federal Reserve Chairman Jerome Powell.

The 30-share index lost 226 points, or 0.7%. The S&P 500 fell 0.3 percent, while the Nasdaq Composite rose 0.1 percent.

Traders were hit by conflicting economic reports on Wednesday morning.

Payroll processing firm ADP said on Wednesday that private companies added just 127,000 jobs for the month, well below the 190,000 consensus estimate of economists polled by Dow Jones. It signaled that the labor market could be cooling, raising hopes that the Federal Reserve would slow its aggressive rate hike campaign.

Job opening data from the Ministry of Labour, which was published later on Wednesday, showed that the number of openings fell and came in below expectations in October. But there were still more openings than available workers.

The Bureau of Economic Analysis reported that third-quarter GDP rose at an annualized rate of 2.9%, according to the second estimate. It was revised higher from the first estimate of 2.6%, showing that the economy is stronger than previously thought.

Meanwhile, pending home sales fell for a fifth straight month in October, according to data from the National Association of Retailers.

“The data was somewhat mixed,” said Edward Moya, senior market analyst at Oanda. “But it shows that there’s a lot of resilience in this economy. And it still highlights a labor market that’s weakening but still in relatively good shape. I think we’re not going to get any answers as to what policy will be like at the end of next year based on these reports.”

Investors await Powell’s speech at the Brookings Institution this afternoon, which may provide further insight into the central bank’s thinking on future rate hikes.

The Fed is scheduled to meet later this month and is widely expected to deliver a smaller rate hike of 0.5 percentage point after four consecutive 0.75 percentage point hikes to curb high inflation. Any signal of a pivot on future rate hikes is likely to send markets higher.

“All eyes will be on Chairman Powell’s speech today, but we don’t think he will break any new ground,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “He wants the stock market lower and he is willing to endure a recession to get inflation back under control.”

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