The tech heavy index reversed its prior rally on Wednesday, driven by a confluence of factors. Firstly, robust labour market data released earlier this week indicated resilience, coupled with the hawkish minutes from the Federal Reserve’s June meeting, which ignited concerns that the central bank may extend its interest rates hiking campaign.

On Thursday tech stocks accelerated the selloff from Wednesday, as investors deliberated over a series of employment data that surpassed expectations. The release of the data, ahead of the crucial U.S. non-farm payrolls report released on Friday, has intensified apprehensions surrounding potential additional interest rate hikes by the Federal Reserve.

On Friday market expectations, as reflected in CME Group’s FedWatch tool, indicate an approximately 92% probability of a rate hike during the central bank’s forthcoming meeting later this month.

Source: TradingView

According to the ADP National Employment report unveiled on Thursday, private payrolls witnessed an increase of 497,000 jobs last month, surpassing the downwardly revised figure of 267,000 in May. Economists had initially anticipated a marginal rise of 228,000. Concurrently, initial jobless claims for the previous week rose to 248,000, slightly exceeding the projected 245,000 claims, as compared to the preceding week’s figure of 236,000.

According to the employment report released by the Labor Department on Friday, nonfarm payrolls increased by 209,000 last month, declining from the downwardly revised figure of 306,000 recorded in May. This outcome fell below economists’ projections of a 225,000 increase. Although the pace of job growth in the U.S. economy has slowed and came short of expectations in June, labour market conditions remained predominantly tight as Federal Reserve officials geared up for an interest rate decision later this month.

Federal Reserve policymakers have consistently emphasized the importance of easing the tightness in the job market as a key objective throughout their year-long campaign of rate hikes, aimed at reining in elevated inflation. At their most recent meeting, the Federal Open Market Committee opted to maintain the current borrowing costs, viewing it as a temporary measure to allow officials more time to evaluate the impact of the ten preceding rate hikes on the overall economy. The committee emphasized the significance of this brief intermission, aiming to assess the impact of these hikes, which collectively amount to a considerable 5 percentage points.

Minutes released on Wednesday unveiled differing perspectives among members, with some advocating for higher rates in response to persistent inflationary pressures. There was vigorous debate among officials regarding whether to implement further rate hikes or maintain the status quo. The minutes acknowledged that a « tight » labour market and the presence of « upside risks » to inflation remain critical factors shaping their economic outlook. Nearly all Fed officials expressed the view that additional adjustments to borrowing costs might be necessary to address these concerns.

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