U.S. equities and stock exchange traded funds were experiencing some gyrations between losses and gains Wednesday after strong hiring data fueled speculation of a rate hike next week.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.1% higher Wednesday.
The markets swung into positive territory after investors had time to digest the ADP National Employment report, which revealed U.S. private sector added 298,000 jobs in February, compared to economists’ estimated average of 190,000, reports Yashaswini Swamynathan for Reuters.
Investors will still have to watch out for Friday’s nonfarm payrolls report, which includes both private and public jobs and acts as a a clearer barometer of U.S. economic growth.
“Equities are at the crossroads of optimism and concern and are likely to go sideways until we get greater clarity from the Fed and legislative action,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told Reuters.
Investors may have also grown more cautious after an extended Trump-induced rally, with many concerned about valuations in the current market. The S&P 500 is now trading at around 18 times forward earnings estimates, compared to the long-term average of about 15 times, according to Thomson Reuters data.
“I think to a degree, equities are priced to perfection and there are several indicators that point to caution,” Sandven added.
Moreover, many are still waiting on President Donald Trump’s administration for policy changes, notably deregulation, tax cuts and higher spending targets.
“U.S. markets, we believe, are in really good shape, but the danger is they’ve priced in a lot of good news,” Michael Thompson, managing director at S&P Global Market Intelligence, told the Wall Street Journal. “The market won’t be happy if we don’t see some movement on middle-class tax cuts. People expect to see tangible plans and debate this year so something gets done in 2018.”
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