Challenger job-cut report sparks selloff amid absence of government data

Investing.com -- U.S. stocks declined Thursday as new private sector employment data showed a significant increase in job cuts, fueling concerns about labor market weakness amid the ongoing federal shutdown.

The Nasdaq 100 dropped 1.5% while the S&P 500 fell nearly 1% as investors digested a report from Challenger, Gray & Christmas showing U.S. employers announced 153,074 job cuts in October, up 175% from the same month last year and 183% higher than September’s figures.

According to the report, October’s job cuts were the highest for any October in over 20 years, prompting traders to increase bets on a Federal Reserve rate cut in December. Money markets now imply about a 60% chance of a quarter-point reduction next month.

"October’s pace of job cutting was much higher than average for the month," said Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas. "Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes."

Analysts offered differing interpretations of the data. Stan Shipley from Evercore ISI noted that while the report was concerning, it "was not as soft as the headlines suggest," pointing out that "30% of the year-to-date layoffs is concentrated in government employment."

Shipley added that technology, industrial goods, leisure and automotive industries experienced particularly large layoffs, while hiring continued to decline. He suggested the market reaction might be excessive, noting that "the 10-year Treasury yield is down some -5 bps because of this release. That seems overstated given all other labor market releases."

Meanwhile, Argus Research analyst Randall Schut highlighted that with the federal shutdown limiting government data, "investors are leveraging alternative information sources to parse economic trends." He noted that October "was the worst in a fourth quarter since 2008," with major companies like Amazon, Target, and UPS announcing significant workforce reductions.

The job cut data triggered a rally in bonds as investors sought safer assets amid growing economic uncertainty. A slide in megacap stocks contributed significantly to the broader market decline.

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