US stocks fell Wednesday morning after a major automaker's earnings and a private sector employment report came in lower than expected.
The Dow Jones Industrial Average lost about 180 points, or 0.5%. The S&P 500 lost 0.3% while the Nasdaq Composite remained flat. The slump comes after the S&P 500 broke a 2-day losing streak on Tuesday to hit a record close, pushing its gains to more than 17% in 2021.
General Motors shares fell about 7% in early trading, hurting the broader market after the automaker missed earnings expectations for the second quarter. The automaker has raised its forecast for a key earnings metric for the remainder of the year.
ADP's private salary survey found 330,000 jobs up in July, well below the consensus estimate of 653,000. The Department of Labor's official job report, which usually has more of an impact on investors, will be released on Friday.
Earnings and economic data for the second quarter were strong overall, but some investors fear the recovery from last year's pandemic will slow down from here.
"Right now, I think the market is moving somewhat cautiously with the triple-peak theory – the potential peak in earnings, the peak in economic growth, and the potential peak in emerging incentives, both from a fiscal and monetary point of view." said Chris Osmond, chief investment officer at Prime Capital Investment Advisors.
"While profits and growth are peaking, it doesn't mean they are going negative, just slowing down," added Osmond.
This week's labor market readings come as the Delta variant of Covid 19 spread across the US, leading to new restrictions and mandates from some companies and local governments.
"The elephant in the room is the Delta variant. It hasn't made any major changes to public health restrictions, but it might make some people nervous about going back to work, especially in those states where the hesitation from." Vaccines has hindered progress, "said James McCann, deputy chief economist at Aberdeen Standard Investments, said in a statement. "However, it is probably too early to see how the Delta variant will really affect the data. It is likely to be drowned out by a broader hiring frenzy at this point."
The 10-year government bond yield traded 1.2% higher on Wednesday but fell below 1.13% at the start of the session. In recent weeks, lower bond yields have tended to take a pessimistic tone for stocks as they raised concerns about the pace of the economic recovery.
Yields and stocks trimmed losses after ISM Services 'purchasing managers' index hit a record high for July, beating expectations.
On the fiscal front, Treasury Secretary Janet Yellen will say Wednesday that the passage of the trillion-dollar bipartisan infrastructure bill is key to maintaining America's status as "the world's greatest economic power." Your comments come while investors wait for the final details of the bill that the Senate is currently haggling over.
A strong earnings season continued after Bell Tuesday, with Caesars Entertainment reporting stronger-than-expected results for the second quarter and leading a rebound to pre-pandemic levels of activity. Travel stocks MGM Resorts, Wynn Resorts and Booking Holdings will report after the bell on Wednesday.
Energy stocks struggled in early Wednesday trading and reversed their strong performance in the previous session. Meanwhile, Robinhood's shares rose more than 60% and continued a volatile rise after last week's sluggish IPO.
In Tuesday's regular trading session, the Dow Jones Industrial Average rose 278 points, or 0.8%, to 35,116.40. The S&P 500 gained 0.8% to hit a new all-time closing high of 4,423.15. The Nasdaq Composite rose 0.6% to 14,761.29.