U.S. stocks trade mostly lower, led by Nasdaq, with recession fears back in focus

What’s driving markets

The rally in U.S. stocks of the past two weeks has stalled for now as investors ponder whether to be pleased that weaker economic data of late has trimmed bond yields, or to be wary of the business downturn those trends foretell.

ADP said private-sector employers added 145,000 jobs in March, well below the 210,000 expected by economists surveyed by The Wall Street Journal.

ADP data will be followed on Thursday by the weekly initial jobless benefit claims and then on Friday, when U.S. stock exchanges are closed for the Good Friday holiday, the March nonfarm payrolls report will be released.

Read:Good Friday complicates how stock-market trader will digest March U.S. jobs report

Meanwhile, the Institute for Supply Management’s service sector activity index, a bellwether of business conditions at U.S. companies fell to a three-month low of 51.2% in March and signaled slackening growth as strains mount on the economy. Economists polled by The Wall Street Journal had expected the index to drop to 54.3%. Numbers above 50% indicate companies are expanding, but the latest survey suggests growth has taken a sharp turn for the worse.

“We are starting to see growing evidence that the U.S. economy is heading towards a recession,” said Edward Moya, analyst at OANDA.

There’s a risk that the Federal Reserve might have overtightened its monetary policy, with growing evidence that points to a potential recession, while the banking crisis is not over, noted Moya. “There are a lot of risks on the table,” Moya said.

While technology stocks have outperformed other sectors so far in 2023, the market seems to be going defensive again on Wednesday, according to Moya. “If you look at the stocks that are up today, those are mostly healthcare and consumer staples stocks,” Moya said.

The 2-year Treasury yield TMUBMUSD02Y, 3.722%, which is particularly sensitive to monetary policy expectations, was about 5% a month ago but on Wednesday was 3.71%.

The extent by which the Federal Reserve’s yearlong campaign to raise interest rates to combat inflation have impacted the economy may be become clearer in coming days.

Adding to the circumspection is news after Tuesday’s closing bell from Walmart
WMT,
+1.01%.
The giant retailer said it expects adjusted earnings per share of $5.90 to $6.05 for its full fiscal 2024, set to end in January. However, this is lower than the FactSet-compiled analyst estimate of $6.11.

Companies in focus

• FedEx Corp.
  FDX,
  +1.32%
  said Wednesday it would boost its dividend by 10% and plans to consolidate its operating companies into a single organization. Shares rose 2%.

• AMC Entertainment Holdings Inc.
  AMC,
  +1.92%’s
  stock rose 2.7% Wednesday, after ending Tuesday’s session down 23.5%. In a filing Monday, AMC AMC announced settlement terms related to shareholder litigation over a proposed stock conversion. The settlement opens the way for the conversion of AMC Preferred Equity units or APEs, into common stock, alongside a 10-to-1 reverse stock split and the capacity to sell more shares.

• Shares of C3.ai Inc.
  AI,
  -12.34%
  dropped 12.6% Wednesday, after a short seller on Tuesday publicly accused the software company of accounting and disclosure irregularities.

• Liminal Biosciences Inc.
  LMNL,
  +94.48%’s
  stock soared over 80% Wednesday, after the company said it’s received an unsolicited takeover offer of $7.50 a share from Structured Alpha LP. That company already owns 64% of the outstanding stock and is now bidding for the rest.

• Shares of 3-D printing company Stratasys Ltd.
  SSYS,
  -0.95%
   edged up 0.2% Wednesday after Nano Dimension Ltd. 
  NNDM,
  -10.92%
   said it was prepared to begin a special tender offering targeting at least 51% ownership of Stratasys’ stock for $18 a share.