Stocks Thumped by Fed's Disclosure on Stimulus

Better-than-anticipated employment data were released Thursday, pointing to upside risks to Friday's key government nonfarm payrolls report. Payroll processor ADP said that 215,000 jobs were added in December, compared with an upwardly revised 148,000 the prior month. Economists, on average, expected ADP to report a gain of 133,000 jobs in December.

"Private sector employment held up remarkably well in December, despite concerns over the fiscal cliff and the tax increases related to the Affordable Care Act," said Dan Greenhaus, chief global strategist at BTIG.

Greenhaus noted that in the December report, and since 2010, small businesses have been trailing large business in adding jobs perhaps in connection to the impact of the health-care law, increased regulation and credit availability. "The lack of meaningful gains among this category (small business) partially speaks to why job growth has been relatively anemic."

The Labor Department reported that initial jobless claims for the week ended Dec. 29 increased by 10,000 to 372,000 from the prior week's upwardly revised 362,000.

"We have to be careful not to read too much into year-end/turn-of-the-year claims data because of volatility associated with shifting holidays and seasonality that is not necessarily adequately adjusted for by the usual statistical procedures," said John Ryding and Conrad DeQuadros, the founders of research firm RDQ Economics.

Gold for February delivery declined Thursday by $14.20 to settle at $1,674.60 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts fell 21 cents at $93.34 a barrel.

The benchmark 10-year Treasury plummeted 19/32 to raise the yield to 1.906%. The dollar jumped 0.73%, according to the U.S. dollar index.

In corporate news, December same-store sales from retailers were mixed as consumers stayed cautious during the key holiday shopping season due to economic uncertainties.

TJX (TJX) rose 3.3% and Ross Stores (ROST) jumped 8% after their December sales beat expectations. Limited Brands (LTD) was off 5.7% after the specialty retailer posted weaker-than-expected sales.