By Maytaal Angel

LONDON (Reuters) – The United Nations food agency’s world price index ended last year about 10% below its 2022, with values in December also down from the previous month, helping further ease concerns over global food price inflation.

The Food and Agriculture Organization’s (FAO) price index, which tracks the most globally traded food commodities, averaged 118.5 points in December, down 1.5% from November and 10.1% below December 2022 levels.

For 2023 as a whole, the index averaged 13.7% below year earlier levels, with only sugar prices higher over the period. The FAO’s sugar price index did, however, decline 16.6% in December from November.

This was “mainly driven by the strong pace of production in Brazil, along with reduced use of sugarcane for ethanol production in India,” the UN agency said in a statement.

The FAO’s cereal price index rose 1.5% in December from November, as wheat, maize, rice and barley prices all rose amid hindered shipments from major exporting countries.

For the year as a whole however, cereal prices were 15.4% below their 2022 average as markets are well supplied with the exception of rice.

The largest price falls were in vegetable oils, with the price index slumping 1.4% in December, from November, and a substantial 32.7% drop for the year as a whole.

The FAO’s meat price index dipped 1.0% in December from November and was down 1.8% year-on-year, while the December diary price index rose 1.6% month-on-month, but was down 16.1% from a year earlier.

(This story has been corrected to fix the time period to say that the price change was in December, not November, in paragraph 7)

(Reporting by Maytaal Angel; Editing by Alex Richardson and Tomasz Janowski)

A look at the day ahead in U.S. and global markets from Mike Dolan

If the Federal Reserve is now wary of a sudden fracture in the U.S. labor market, it won’t be unduly alarmed by what it’s seen of December employment so far.

With Friday’s payrolls report looming over New Year markets all week – pointing to the first weekly loss in global equities since October – most other readouts of U.S. hiring last month looked to still be in rude health.

The number of Americans filing new claims for jobless benefits dropped to a two-month low last week, ADP’s private sector payrolls increased by 164,000 – the biggest gain in four months – and job cuts announced by U.S.-based employers dropped 24% last month. While falling job openings did show some cooling of labor demand, the numbers were for November.

All of which points to another robust national employment picture later today – with forecasts angling for a payrolls increase of 170,000 jobs, down from November’s 199,000. The jobless rate is expected to tick back up to 3.8%.

Even though minutes of the Fed’s December policy meeting, which electrified rate cut hopes last month, pointed to fears of “overly restrictive” policy in the event of an “abrupt downshift” in employment, there’s little sign of that yet.

All of which has seen futures markets gradually pare back bets on the extent of 2024 Fed easing all week.

Just ahead of Friday’s jobs report, the chance of the first quarter-point Fed cut by March dipped below 70% compared to being fully priced late last month. And the amount of overall easing in 2024 was reduced to 133 basis points, compared to 150bps just before the holiday.

While the staffing picture should underline “soft landing” hopes for the economy, the interest rate picture still dominates the overall market mood.

Two-year Treasury yields jumped above 4.4% on Friday for the first time since Dec. 20, with 10-year yields back above 4% and at their highest since the Fed meeting on Dec. 13. The dollar is getting a shot in the arm from the Fed rethink and also hit its best level since the day after the Fed bombshell dropped last month.

The rates recalibration has made for a miserable opening week for stocks, with Wall St benchmarks ending in the red in all three trading days of 2024 so far and futures down again ahead of Friday’s bell.

Including the last two days of December, the five-day slide in the S&P500 is the longest losing streak since September and, just like 10-year Treasury yields, the index has returned to Fed-day levels.

The VIX index of Wall St equity volatility closed at its highest level since mid-November on Thursday.

Elsewhere, oil and commodity markets were steadier. The United Nations food agency said its world food price index ended last year about 10% below its year-earlier level.

European stocks were lower as they digested news of an expected jumpback in headline annual inflation in the euro zone for December. But the inflation rate came in below forecast and under 3% and, annual base effects aside, underlying disinflation momentum remained in train with producer prices plunging again.

In China, stocks stuttered yet again in the gloomy economic picture there. But hopes of more monetary easing from the People’s Bank of China saw yields on the benchmark 10-year government bond fall to 2.525% – the lowest since April 2020.

Key diary items that may provide direction to U.S. markets later on Friday:

* U.S. Dec employment report, U.S. Dec ISM service sector survey, U.S. Nov Factory orders; Canada Dec employment report

* Richmond Federal Reserve President Thomas Barkin speaks

* U.S. corporate earnings: Constellation Brands

(By Mike Dolan, editing by Nick Macfie; [email protected])

By Trevor Hunnicutt

WASHINGTON (Reuters) – President Joe Biden on Friday will mark three years since the Jan. 6 attacks on the U.S Capitol with a warning to voters that Republican Donald Trump is a threat to the country’s standing as a free democracy.

Trump, who was president from 2017 to 2021 and is again seeking the Republican nomination for president, contested his defeat in the 2020 election, prompting thousands of his supporters to attack the U.S Capitol on Jan. 6, 2021, in a failed bid to stop formal certification of the result.

Speaking near George Washington’s Revolutionary War-era headquarters in Pennsylvania, Biden, a Democrat, will inaugurate the 2024 campaign year with an implicit pitch that a vote for him means a continuation of American style of democratic government and a vote for Trump a leap into an uncharted future.

Biden was scheduled to deliver his remarks a day before the Jan. 6 anniversary to avoid a forecast winter storm.

Biden aides expect the 2024 race will be closely contested and see Pennsylvania as a must-win. Biden won Pennsylvania, where he was born, in 2020 with 50.01% of the vote. In 2016, Trump won Pennsylvania with 48.58% of the vote.

What impact Biden’s Friday speech will make in a politically polarized country 10 months away from Election Day is an open question.

Biden has long used his platform to warn Americans about Trump, but that has done little to shake the faith of tens of millions of the ex-president’s supporters, who have given him a commanding lead for the Republican nomination in public opinion polls.

In addition, Biden’s arguments have done little to soothe his own supporters’ concerns about the state of the economy or his age, 81.

Trump, 77, has portrayed the 2024 race in similarly existential terms, calling his criminal trials a persecution and describing Biden as a crook.

Despite facing federal charges over election interference, Trump in recent months has teased acting as a dictator on “day one” and pledged to investigate, incarcerate and otherwise take revenge on his political opponents.

Trump is expected to spend Saturday’s anniversary campaigning with rallies in Iowa, which hosts the first Republican nominating contest of the presidential race on Jan. 15. His leading opponents have largely avoided raising the Jan. 6 attack or Trump’s role in it.

Lawyers for Trump have disputed that he engaged in insurrection and argued that his remarks to supporters on the day of the 2021 riot were protected by his constitutional right to free speech.

Authorities are seeking information about more than 80 people who committed violence at the Capitol and remain unidentified, Matthew Graves, the U.S. attorney for the District of Columbia, told reporters on Thursday. Graves’ office has overseen the prosecution of more than 1,200 people so far accused of committing crimes during the attack.

Graves said authorities have two more years to charge rioters before the statute of limitations expires.

“Our democracy is fragile,” he told reporters during a briefing on the investigation into the attack. “We cannot replace votes and deliberation with violence and intimidation.”

CAMPAIGN TRAIL

Biden’s Friday event is officially billed as a re-election event, his most significant foray on the campaign trail to date after he spent much of 2023 touting his signature legislation and the economy at White House events not technically associated with the campaign.

In 2024, Biden aides plan to pair the threat-to-democracy argument with more bread-and-butter topics about U.S. job growth, falling inflation, healthcare, gun violence and abortion rights, hoping to reassemble the coalition of 81 million voters that delivered Biden to the White House in 2020, with his party then in control of both houses of Congress.

Democrats in the 2022 mid-term elections lost control of the House of Representatives to Republicans, but maintained control of the Senate with a slim margin.

Trump holds a marginal, two-point lead in a head-to-head matchup with Biden, 38% to 36%, with 26% of respondents saying they were unsure or might vote for someone else, according to the latest Reuters/Ipsos poll.

Biden prepared for the long-planned speech by inviting a group of historians and scholars to the White House for a wide-ranging conversation on the threats to the country’s democracy.

The audience is expected to include people directly affected by “election denialism and the events of Jan. 6,” according to a person familiar with the planning of the speech.

(Reporting by Trevor Hunnicutt; Additional reporting by Andrew Goudsward; Editing by Leslie Adler)

By David French

(Reuters) -The S&P 500 and Nasdaq Composite closed lower on Thursday, extending their losing streak that kicked off 2024, although the Dow Jones Industrial eked out a win on the back of financial stocks and strong jobs data.

For the S&P 500, this is the worst start to a year since it began 2015 with a three-session skid, as tech-focused investors continued to take profits after a blistering rally in the final weeks of last year.

Bets that the Federal Reserve could start reducing rates this year had driven much of the gains toward the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

A tick-up in yields on longer-dated U.S. Treasuries – the benchmark 10-year note ended at 4% – prompted traders to move away from growth stocks toward other sectors. [US/]

Financials was one of the few gainers among the S&P 500 sectors, underpinned by Allstate, which rose 2.4% to close at an all-time high after Morgan Stanley lifted its rating on the insurer to “overweight.”

Other insurers also rose, including Hartford Financial Services Group, which gained 0.7% to its highest finish since 2008.

Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co and Truist Financial Corp were among those which advanced, up 0.7% and 1.3% respectively, after both received positive analyst reports from BofA Global Research.

Last year was one of substantial upheaval in the banking sector, as institutions managed the impact of rapid increases in central bank rates on their balance sheets.

Banks should benefit in 2024 from lower-yielding investments rolling off and being reinvested in new securities with higher yields, said Ian Lapey, portfolio manager of The Gabelli Global Financial Services Fund.

Coupled with rotation out of more speculative, growth names, banks with strong management teams will reward investors, he added.

“We’re setting up for significant relative outperformance of the strongly managed and financed banks and other financials, as compared to other, more expensive areas of the market.”

Among the latest economic data, the ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent labor market strength that should continue to sustain the economy. This came ahead of official U.S. employment data due on Friday.

Meanwhile, the weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

The S&P 500 lost 16.13 points, or 0.34%, to end at 4,688.68 points, while the Nasdaq Composite lost 81.91 points, or 0.56%, at 14,510.3. The Dow Jones Industrial Average rose 10.15 points, or 0.03%, to 37,440.34.

Most S&P sectors were down, led by energy which fell 1.6% after a massive U.S. fuel inventory build pushed crude prices lower. [O/R]

A number of big-tech names also ended lower, with Amazon.com Inc <AMZN.O> down 2.6% and Alphabet Inc <GOOGL.O> declining 1.8%. Apple shares slid 1.3% after brokerage Piper Sandler downgraded the iPhone maker to “neutral,” days after Barclays also cut its rating.

Mobileye Global sank 24.5% after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance dropped 5.1% after the U.S. pharmacy chain nearly halved its dividend.

The volume on U.S. exchanges was 11.13 billion shares, compared with the 12.30 billion average over the last 20 trading days.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Richard Chang)

By David French

(Reuters) -The S&P 500 and Nasdaq Composite closed lower on Thursday, extending their losing streak that kicked off 2024, although the Dow Jones Industrial eked out a win on the back of financial stocks and strong jobs data.

For the S&P 500, this is the worst start to a year since it began 2015 with a three-session skid, as tech-focused investors continued to take profits after a blistering rally in the final weeks of last year.

Bets that the Federal Reserve could start reducing rates this year had driven much of the gains toward the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

A tick-up in yields on longer-dated U.S. Treasuries – the benchmark 10-year note ended at 4% – prompted traders to move away from growth stocks toward other sectors. [US/]

Financials was one of the few gainers among the S&P 500 sectors, underpinned by Allstate, which rose 2.4% to close at an all-time high after Morgan Stanley lifted its rating on the insurer to “overweight.”

Other insurers also rose, including Hartford Financial Services Group, which gained 0.7% to its highest finish since 2008.

Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co and Truist Financial Corp were among those which advanced, up 0.7% and 1.3% respectively, after both received positive analyst reports from BofA Global Research.

Last year was one of substantial upheaval in the banking sector, as institutions managed the impact of rapid increases in central bank rates on their balance sheets.

Banks should benefit in 2024 from lower-yielding investments rolling off and being reinvested in new securities with higher yields, said Ian Lapey, portfolio manager of The Gabelli Global Financial Services Fund.

Coupled with rotation out of more speculative, growth names, banks with strong management teams will reward investors, he added.

“We’re setting up for significant relative outperformance of the strongly managed and financed banks and other financials, as compared to other, more expensive areas of the market.”

Among the latest economic data, the ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent labor market strength that should continue to sustain the economy. This came ahead of official U.S. employment data due on Friday.

Meanwhile, the weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

The S&P 500 lost 16.13 points, or 0.34%, to end at 4,688.68 points, while the Nasdaq Composite lost 81.91 points, or 0.56%, at 14,510.3. The Dow Jones Industrial Average rose 10.15 points, or 0.03%, to 37,440.34.

Most S&P sectors were down, led by energy which fell 1.6% after a massive U.S. fuel inventory build pushed crude prices lower. [O/R]

A number of big-tech names also ended lower, with Amazon.com Inc <AMZN.O> down 2.6% and Alphabet Inc <GOOGL.O> declining 1.8%. Apple shares slid 1.3% after brokerage Piper Sandler downgraded the iPhone maker to “neutral,” days after Barclays also cut its rating.

Mobileye Global sank 24.5% after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance dropped 5.1% after the U.S. pharmacy chain nearly halved its dividend.

The volume on U.S. exchanges was 11.13 billion shares, compared with the 12.30 billion average over the last 20 trading days.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Richard Chang)

By David French

(Reuters) -The Dow Jones Industrial closed up on Thursday, the first time in 2024 a major Wall Street benchmark finished higher, as financial stocks and strong jobs data prompted investors to delay estimates of when interest-rate cuts could begin.

However, the Nasdaq Composite chalked up its third straight loss, extending its bleak start to the year, as tech-focused investors continued to take profits after a blistering rally in the final weeks of last year.

Bets that the Federal Reserve could start reducing rates this year had driven much of the gains toward the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

Investors remained cautious on Thursday, and a tick-up in yields on longer-dated U.S. Treasuries – the benchmark 10-year note was back close to 4% – prompted traders to move away from growth stocks toward other sectors. [US/]

Financials was among the leading gainers among the S&P 500 sectors, underpinned by Allstate, which hit an all-time high after Morgan Stanley lifted its rating on the insurer to “overweight.”

Other insurers also rose, including both American International Group and Hartford Financial Services Group, which closed at levels last seen in 2008.

Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co and Truist Financial Corp were among those which advanced, after both received positive analyst reports from BofA Global Research.

Last year was one of substantial upheaval in the banking sector, as institutions managed the impact of rapid increase in central bank rates on their balance sheets.

Banks should see benefits in 2024 from lower-yielding investments rolling off and being reinvested in new securities with higher yields, said Ian Lapey, portfolio manager of The Gabelli Global Financial Services Fund.

Coupled with rotation out of more speculative, growth names, banks with strong management teams will reward investors, he added.

“We’re setting up for significant relative outperformance of the strongly managed and financed banks and other financials, as compared to other, more expensive areas of the market,” Lapey said.

Among the latest economic data, the ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent strength in the labor market that should continue to sustain the economy. This came ahead of official U.S. employment data due on Friday.

Meanwhile, the weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

According to preliminary data, the S&P 500 lost 15.11 points, or 0.32%, to end at 4,689.70 points, while the Nasdaq Composite lost 82.83 points, or 0.57%, to 14,509.39. The Dow Jones Industrial Average rose 20.69 points, or 0.06%, to 37,450.88.

Despite the overall positive tone, most S&P sectors were down, led by energy which fell after a massive U.S. fuel inventory build pushed crude prices lower. [O/R]

Apple shares slid after brokerage Piper Sandler downgraded the iPhone maker to “neutral,” days after Barclays also cut its rating.

Mobileye Global sank after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance dropped after the U.S. pharmacy chain nearly halved its dividend.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Richard Chang)

By David French and Shristi Achar A

(Reuters) -The S&P 500 and Dow Jones Industrial were on course for their first positive sessions of 2024 on Thursday, as financial stocks and strong jobs data prompted investors to delay estimates of when interest-rate cuts could begin.

The recovery in two of the main U.S. stock indexes follows a downbeat start to 2024, with the S&P 500 notching its worst two-day performance since late October on profit-taking after a blistering rally last year.

Bets that the Federal Reserve could start reducing rates this year had driven much of the gains toward the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

Traders see a 66.4% chance for at least a 25-basis point (bps) rate cut in March and a near 93% probability for May, according to the CME Group’s FedWatch tool.

Financials led gains among the S&P 500 sectors with a 0.8% rise. The move was underpinned by Allstate, which hit an all-time high and was trading up 3.4% after Morgan Stanley lifted its rating on the insurer to “overweight.”

Other insurers also rose, with both American International Group and Hartford Financial Services Group <HIG.N> touching their highest levels since 2008. At mid-afternoon, they were up 0.9% and 1.7%, respectively.

Banks were strong performers ahead of the start of earnings season next week. JPMorgan Chase & Co hit a record high, and was up 1.2%, after BofA Global Research raised its price target. Truist Financial Corp advanced 1.7% after BofA upgraded its rating and price target.

An ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent strength in the labor market that should continue to sustain the economy.

Private payrolls increased by 164,000 in December, compared with a 101,000 rise the month before. Official U.S. employment data are due on Friday.

“Today’s numbers were a little muted. They weren’t something that says we need to cut rates tomorrow,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“So what you’re seeing is people resetting expectations as to when those rate cuts will start.”

A weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

Yields on longer-dated U.S. Treasuries rose after the data, with the yield on the benchmark 10-year note back close to 4% at mid-afternoon. [US/]

Investors also assessed the S&P Global’s final reading of composite PMI data for December at 50.9, compared with a preliminary reading of 51.0.

At 1:53 p.m. ET, the Dow Jones Industrial Average was up 140.2 points, or 0.37%, at 37,570.39, and the S&P 500 was up 6 points, or 0.13%, at 4,710.83. However, the Nasdaq Composite was down 8.1 points, or 0.06%, at 14,584.14.

Despite the overall positive tone, most S&P sectors were down, led by energy which fell 1.1% after a massive U.S. fuel inventory build pushed crude prices lower. [O/R]

Apple shares slid 0.8% after brokerage Piper Sandler downgraded the iPhone maker to “neutral”, days after Barclays also cut its rating.

Dow component Merck added 2.2% after TD Cowen upgraded the drugmaker to “outperform” on growth prospects.

Mobileye Global sank 26% after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance shed 6.6% after the U.S. pharmacy chain nearly halved its dividend.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru and David French in New York; Editing by Devika Syamnath and Richard Chang)

(Refiling to remove repetitive paragraph 7)

A look at the day ahead in U.S. and global markets from Mike Dolan

A relatively soothing bond market reading of the Federal Reserve’s latest meeting minutes has helped calm the new year horses, but edgy geopolitics and oil price gains still rankle.

Even though Wall St stock indexes clocked a second straight day of hefty losses on Wednesday – led this time by the biggest one-day drop in small cap stocks since the March regional bank crunch – bonds rallied on the minutes.

While the Fed predictably gave no timeline for rate cuts this year, it flagged impressive disinflation and concerns about “overly restrictive” policy into a slowing economy – and risks to its dual mandate of stable prices and maximum employment in the event of an “abrupt downshift” in labor markets.

But Treasuries – where 10-year yields have retreated about 5 basis points from Wednesday’s 4% peaks – got an additional fillip from a Fed discussion about how it may trail a slowing of its balance sheet rundown – or “quantitative tightening” (QT) process.

Although Fed officials said market liquidity was still abundant, some pointed to the steep drop in daily takeup of the Fed’s “reverse repo” money draining facility and said it would be “appropriate” to begin discussing the factor that may lead the central bank to slow the balance sheet runoff and halt QT.

The effect of the Fed minutes combined with news that U.S. job openings fell to nearly a three-year low in November as the labor market gradually cools and an ISM manufacturing survey showing another month of contracting activity and falling input prices.

With the fourth-quarter corporate earnings season looming next week, the cooling of the wider economy has seen the U.S. economic surprise index on the cusp of turning negative for the first time since May.

Richmond Fed boss Thomas Barkin struck a dovish note on Wednesday and flagged “real progress” on inflation that made a soft economic landing “increasingly conceivable”.

The upshot of all the new information was another slight drop in the futures’ market chances of first Fed rate cut by March to 75% – but with 146 bps of rate cuts still priced for the whole year. And U.S. stock futures have caught a break and are trading higher at last before Thursday’s open.

The dollar index retreated from near one-month highs as U.S. yields subsided.

SUPPLY CHAIN JITTERS

Ahead of Friday’s December employment report, Thursday’s data diary throws up ADP’s private sector jobs reading and Challenger’s layoff numbers for the same month – as well as weekly jobless claims.

But as many eyes may be on the New York Fed’s global supply chain pressure index – with fears of an escalation of the Middle East conflict increasing jitters about shipping supply chains and oil prices.

Members of the U.N. Security Council on Wednesday called on Yemen’s Iran-aligned Houthis to halt their attacks on shipping in the Red Sea and Gulf of Aden, saying they are illegal and threaten regional stability, freedom of navigation and global food supplies.

But tensions in Iran increased as its elite Revolutionary Guards and First Vice President Mohammad Mokhber vowed revenge for explosions this week that killed nearly 100 people at a ceremony to commemorate top commander Qassem Soleimani, who was killed by a U.S. drone in 2020 in Iraq.

Oil rose more than 1% on Thursday – with year-on-year U.S. crude flipping to its most positive since October – and added to gains in the previous session on concerns over Middle Eastern supply following disruptions at an oilfield in Libya and heightened tensions regarding the Israel-Hamas war.

U.S. crude gains were spurred by news the U.S. government was seeking three million barrels to re-fill its strategic petroleum reserve.

In Europe, headline annual inflation rates for last month climbed again – but monthly readings were more subdued and below many forecasts.

Key diary items that may provide direction to U.S. markets later on Thursday:

* U.S. Dec ADP private sector jobs, Dec Challenger layoffs, weekly jobless claims, NY Fed’s Dec global supply chain pressure index, U.S. Dec final S&PGlobal service sector survey

* U.S. Treasury sells 4-week bills

* U.S. corporate earnings: Conagra brands, Walgreens Boots Alliance, Lamb Weston Holdings

(By Mike Dolan, Editing by Alison Williams; [email protected])

By Johann M Cherian and Shristi Achar A

(Reuters) -Wall Street rose on Thursday, boosted by gains in financial stocks, while strong jobs data prompted investors to tweak their expectations of how early interest-rate cuts could begin.

The recovery in the three main U.S. stock indexes follows a downbeat start to 2024, with the S&P 500 notching its worst two-day performance since late October as investors booked profits after a blistering rally last year.

Bets that the Federal Reserve could start reducing interest rates this year had driven much of the gains towards the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

Traders see a 66.4% chance for at least a 25-basis point (bps) rate cut in March and a near 93% probability for May, according to the CME Group’s FedWatch tool.

Financials led gains among the S&P 500 sectors with a 1.1% rise, underpinned by a 3.4% advance in Allstate after Morgan Stanley lifted its rating on the insurer to “overweight”.

An ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent strength in the labor market that should continue to sustain the economy.

Private payrolls increased by 164,000 in December, compared with a 101,000 rise the month before. The report comes ahead of the official employment data due on Friday.

“Today’s numbers were a little muted, they weren’t something that says, we need to cut rates tomorrow,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“So what you’re seeing is people resetting expectations as to when those rate cuts will start.”

Separately, a weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

Yields on longer-dated U.S. Treasury tenors rose after the data, with the yield on the benchmark 10-year note climbing to 3.9761%. [US/]

Investors also assessed the S&P Global’s final reading of composite PMI data for December at 50.9, compared with a preliminary reading of 51.0.

At 11:29 a.m. ET, the Dow Jones Industrial Average was up 274.77 points, or 0.73%, at 37,704.96, the S&P 500 was up 20.24 points, or 0.43%, at 4,725.05, and the Nasdaq Composite was up 31.25 points, or 0.21%, at 14,623.46.

Apple slid 1.1% after brokerage Piper Sandler downgraded the iPhone maker to “neutral”, days after Barclays also cut its rating.

Dow component Merck added 2.4% after TD Cowen upgraded the drugmaker to “outperform” on growth prospects.

Micron Technology gained 1.8% after brokerage Piper Sandler upgraded its recommendation on the chipmaker to “overweight”.

Mobileye Global sank 24.3% after forecasting preliminary fiscal 2024 revenue below estimates, while Walgreens Boots Alliance shed 6.4% after the U.S. pharmacy chain nearly halved its dividend.

Advancing issues outnumbered decliners by a 1.77-to-1 ratio on the NYSE and by a 1.47-to-1 ratio on the Nasdaq.

The S&P index recorded 16 new 52-week highs and no new lows, while the Nasdaq recorded 45 new highs and 50 new lows.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)

By Johann M Cherian and Shristi Achar A

(Reuters) – The benchmark S&P 500 and the Nasdaq were subdued on Thursday after a jobs report indicated resilience in the labor market, tempering expectations of how early interest-rate cuts could begin.

Wall Street stumbled in the first two sessions of 2024, with the S&P 500 notching its worst two-day performance since late October as investors booked profits after a blistering rally last year.

Bets that the Federal Reserve could start reducing interest rates this year had driven much of the gains towards the end of 2023, though the latest minutes from the central bank’s December policy meeting did not offer many clues on when the easing might commence.

Traders see a 66.4% chance for at least a 25-basis point (bps) rate cut in March and a near 92% probability for May, according to the CME Group’s FedWatch tool.

An ADP National Employment report showed U.S. private employers hired more workers than expected in December, pointing to persistent strength in the labor market that should continue to sustain the economy.

Private payrolls increased by 164,000 in December, compared with a 101,000 rise the month before. The report comes ahead of the official employment data due on Friday.

“It puts a question mark as to whether or not tomorrow’s official employment data will be more than what markets expect,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

“This plays into the hands of whoever is expecting a soft landing. But let’s not forget that we’ve had a big rally so what we’re seeing, what we saw in the past couple of days, was a technical adjustment.”

Separately, a weekly Labor Department report showed more Americans filed for state unemployment claims than expected.

Yields on longer-dated U.S. Treasury tenors rose after the data, with the yield on the benchmark 10-year note climbing to 3.991%. [US/]

Investors also assessed the S&P Global’s final reading of composite PMI data for December at 50.9, compared with a preliminary reading of 51.0.

In company news, Apple slid 1.4% after brokerage Piper Sandler downgraded the iPhone maker to “neutral”, days after Barclays also cut its rating.

Dow component Merck added 1.7% after TD Cowen upgraded the drugmaker to “outperform” on growth prospects.

At 9:50 a.m. ET, the Dow Jones Industrial Average was up 102.81 points, or 0.27%, at 37,533.00, the S&P 500 was up 0.60 points, or 0.01%, at 4,705.41, and the Nasdaq Composite was down 54.92 points, or 0.38%, at 14,537.30.

Consumer discretionary and information technology stocks led declines among the 11 S&P 500 sectors, down 0.4% each.

Micron Technology gained 1.1% after brokerage Piper Sandler upgraded its recommendation on the chipmaker to “overweight”.

Mobileye Global sank 26.3% after forecasting preliminary fiscal 2024 revenue below estimates.

Walgreens Boots Alliance reversed premarket gains to shed 10.9% after the U.S. pharmacy chain nearly halved its dividend.

Advancing issues outnumbered decliners by a 1.10-to-1 ratio on the NYSE and by a 1.02-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and no new low, while the Nasdaq recorded 14 new highs and 30 new lows.

(Reporting by Johann M Cherian and Shristi Achar A in Bengaluru; Editing by Devika Syamnath)