Key Highlights

● Resources Connection slid on the Nasdaq Composite after reporting a wider quarterly loss on Thursday, October 8.

● The stock fell by more than a tenth in the reaction, according to one Earnings roundup.

● The firm supplies experienced consultants to corporate clients on a project basis, across finance, risk, technology and transformation.

● September payrolls rose by just 29,000, while initial jobless claims fell to 197,000, the lowest since July.

Resources Connection (NASDAQ:RGP) slid on the Nasdaq Composite after the professional-services firm released quarterly results showing a wider loss. The figures came out on Thursday, October 8, and the stock fell by more than a tenth in the reaction, according to an earnings roundup, putting it among the more notable decliners of the late-week earnings batch.

The company, which trades under the Resources Global Professionals brand, supplies experienced consultants to corporate clients on a project basis, with work spanning finance and accounting, risk and compliance, technology and Business transformation. Its Revenue depends heavily on how willing companies are to spend on outside expertise, which tends to track the Business Cycle and corporate confidence.

A tough backdrop for discretionary corporate spending

The macro picture offered little comfort for businesses that live on corporate budgets. The September jobs report showed payrolls rising by just 29,000, well below forecasts, and the two prior months were revised down by a combined 60,000. Initial jobless claims, by contrast, fell to 197,000 in the latest week, the lowest since July, painting a mixed picture of the labor market.

Consumer mood also soured. The University of Michigan's preliminary October sentiment index dropped to 46.3 from 48.1, a five-month low. "Frustration over cost-of-living continues to mount," said Joanne Hsu, director of the University of Michigan Surveys of Consumers.

At the same time, borrowing costs remain elevated. The Fed raised rates in September for the first time since 2023, the 10-year Treasury Yield sat near a 24-year high, and Fed Governor Christopher Waller said Thursday he anticipates additional hikes to bring Inflation back to the Fed's goal. Higher financing costs can make clients more cautious about launching new projects that require outside consultants.

Against a rising market

The slide came against a positive tone for the broader market. The Nasdaq Composite climbed 172.83 points to 27,366.17 on Friday, the S&P 500 added 46.18 points to 7,811.54, and the Dow gained 423.31 points to 51,654.95. Gainers outnumbered losers on the Nasdaq by 2,756 to 1,997.

Smaller companies, however, have had a harder time. The Russell 2000 rose 12.85 points to 2,806.98 on Friday but still posted its fifth straight weekly loss. Small-cap stocks that disappoint on earnings in this environment have often been punished quickly, as investors favor larger companies with steadier profits.

Earnings season is about to begin in earnest

Resources Connection reported ahead of the main wave of third-quarter results. Analysts expect strong profit growth for S&P 500 companies this season, led by energy and technology, though that forecast covers the large companies in the index rather than smaller service businesses like Resources Connection.

Daniela Hathorn, a senior market analyst, put the market's hopes plainly: "Strong earnings combined with moderating inflation would offer the most supportive backdrop for equities." For consulting-heavy firms, the question is whether those conditions arrive soon enough to revive client demand.

Bank Earnings Comments on Corporate Activity Could Offer Read-Throughs for Resources Connection

Stocks trade on Monday, October 12, while the Bond Market is closed for Columbus Day, and the Fed's next meeting is on October 27 and 28. Next week brings September consumer prices on Wednesday, October 14, with producer prices and retail sales the following day. Big banks report from October 13 to 16, starting with JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Citi (NYSE:C) and Wells Fargo (NYSE:WFC), and their comments on corporate activity could offer read-throughs for professional-services firms.