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The information technology sector (down 2.1 per cent) weakened as accounting software company Xero shed 2.6 per cent and WiseTech dropped 2.3 per cent.

The lowdown:

Tony Sycamore, market analyst at IG Australia, said the decline in the ASX on Thursday reflected a weak lead from the US as well as profit taking in the last day of trading this week.

“The main factors behind the weaker session today were a bout of profit taking ahead of the Easter weekend and important jobs data coming out of the US that showed cracks starting to appear,” Sycamore said. He said there was more important jobs data coming out of the US on Friday, “and if it’s a weak number, it could cause turbulence on the ASX when markets reopen on Tuesday.”

He also said Reserve Bank Governor Philip Lowe’s comments at the National Press Club on Wednesday continued to weigh on the local bourse.

“The market was looking tired after the RBA decision this week and even more so after Lowe reiterated that the pause in interest rates does not mean an end of rate hikes,” Sycamore said.

He said defensive sectors performed better as investors rotated away from growth stocks, which tend to perform better in low-interest rate environments.

Stocks on Wall Street mostly slipped overnight following the latest signals that the US economy is slowing under the weight of much higher interest rates.

The S&P 500 dipped by 0.2 per cent a day after it broke a four-day winning streak. The Dow Jones rose by 0.2 per cent, to 33,482.72, and the Nasdaq dropped by 1.1 per cent.

Yields also fell in the bond market following weaker-than-expected reports on the health of US services industries and the job market. They’re the latest signs that the world’s largest economy is losing momentum following a feverish set of hikes to interest rates by the Federal Reserve meant to get inflation under control.

One report from the Institute for Supply Management said that growth in the US services sector slowed last month by more than economists expected, as the pace of new orders cooled. A separate report suggested private employers added 145,000 jobs in March, down sharply from February’s 261,000. Perhaps more importantly for markets, pay raises also weakened for workers, according to the ADP Research Institute.

“Our March payroll data is one of several signals that the economy is slowing,” said Nela Richardson, chief economist at ADP. “Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down.”

Higher interest rates can undercut inflation, but only by slowing the entire economy with a blunt hammer. The hope is that the Fed can pull off the tricky balancing act of slowing the economy and job market just enough to stamp out high inflation, but not so much that it causes a recession. The Fed has hiked rates over the last year at the fastest pace in decades.

ADP’s private payroll report could offer a preview of what Friday’s more comprehensive jobs report from the US government will show on Friday. Economists expect it to say employers added 240,000 jobs last month, down from 311,000 in February.

If the job market really is slowing from the strong growth that’s helped to prop up the larger economy recently, it could offer the Fed reason to pause on its hikes to interest rates.

That’s a big deal for markets not only because it could lessen the odds of an upcoming recession, which some economists already see as a high probability. Higher rates also drag on prices for stocks, bonds and other investments.

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Other reports on the economy this week also came in weaker than expected, including readings on the number of job openings across the country and the health of the manufacturing sector.

The reports have traders increasing bets for the Fed to hold rates steady at its next meeting in May, which would be the first time that’s happened in more than a year. Many traders are also betting the Fed will have to cut rates later this year, something that can act like steroids for markets.

The Fed, though, has consistently said it doesn’t expect to cut rates this year. Inflation is still high, and the Fed has talked often about the risk of letting up on the battle too soon. Other central banks around the world are staying aggressive to fight it.

Tweet of the day:

Quote of the day:

“Regulators can’t regulate away fear, but you can put a cap on it,” said Morgan Stanley’s global boss, Australian James Gorman, underlining the need for stringent risk management and rigorous oversight to limit banking crises and poor decisions by bankers after a turbulent month in financial markets.