Stocks fall after hot job data provides good and bad news

NEW YORK (AP) — Stocks fell like a roller coaster on Friday after a blockbuster report on the US job market provided both good and bad news for Wall Street.

The S&P 500 fell 0.9% in midday trading after recovering to near breakeven from an early loss of 1.1%. Other stock indices were similarly volatile as US employers unexpectedly accelerated hiring last month, adding hundreds of thousands more jobs than expected.

The blistering data suggests the economy may not be in recession as feared. But it also undermines investor speculation that a slowdown in the economy could mean a near-term peak in inflation. That means the Federal Reserve (Fed) may not give up aggressive rate hikes to combat inflation as soon as hoped. And much of Wall Street still revolves around interest rate expectations.

Tech stocks and other high-growth stocks again bore the brunt of losses amid fears of rising interest rates, with the Nasdaq Composite down 1.5% at 11:30 am ET.

Good news on the job market has helped cap losses in the Dow Jones Industrial Average, which tends to move more on expectations of the economy as a whole. 0.6%, 180 It was 32,545, a point decrease.

Beyond the country’s strong employment, wage growth for workers also unexpectedly accelerated last month. This is beneficial for households trying to keep up with the fastest price increase in 40 years. But it also raises concerns on Wall Street that inflation will take deeper roots in the economy.

Rising wages can lead to what economists call a “wage-price spiral”, as companies raise the prices of their products to maintain profits.

Indeed, some market watchers have pointed to figures from Friday’s jobs report, suggesting that the job market may not be as strong as the overall numbers suggest. For example, the number of people with multiple jobs has increased by more than 500,000, according to Brian Jacobsen, senior investment strategist at Allspring Global Investments.

“It was mostly from people who already had a full-time job and had a part-time job next,” he said. , superficially impressive.”

Wall Street’s most obvious move came from the bond market, where Treasury yields surged shortly after the release of the jobs report. Two-year US Treasury yields, which tend to reflect expectations of Federal Reserve (Fed) action, jumped to 3.20% from 3.05% late Thursday. The 10-year yield rose to 2.84% from 2.69%.

Wall Street is about to have its best month for stocks since late 2020. Wall Street’s hope was that the economy slowed enough for the Fed to ease its rate hikes.

Rising mortgage rates hit the housing industry, especially after the Fed raised short-term rates four times this year. The last two rate hikes have tripled his normal rate, and the Fed has lifted the overnight rate benchmark from near zero to 2.25 percentage points.

“Today’s share price is well above expectations, complicating our task,” said Rick Reader, BlackRock’s chief investment officer for global fixed income, in a statement. He said that unless next week’s highly anticipated report on inflation shows “dramatic weakness, which is highly unlikely at this point,” the Fed will report short-term growth next month. He said the assumption would be a further 0.75 percentage point hike in interest rates.

Traders scrambled to bet on a bigger rate hike due at the Fed’s next meeting. They reversed their predictions from the previous day and generally expect the Fed to raise rates by 0.75 points instead of 0.75 points.

Such a rise will hurt investment prices in the short term and deliberately slow the economy, further increasing the risk of a recession.

Such expectations also mean that 2-year Treasury yields are above 10-year yields. This is an anomaly, and some investors see it as a sign that a recession will hit the economy within the next year or two.

Better-than-expected earnings reports from companies have contributed to the rally in stocks in recent weeks. On Friday, Warner Bros. Discovery fell his 16.4%, the S&P 500’s biggest loss, after reporting weaker results in recent quarters than analysts expected. Monster Beverage suffered a 7% loss after reporting weaker-than-expected gains despite stronger-than-expected earnings.

In overseas stock markets, India’s Sensex followed the Reserve Bank of India with a gain of 0.2%. raised the base interest rate 0.5 percentage points to 5.4%.

Japan’s Nikkei 225 rose 0.9% while Germany’s DAX fell 0.5%.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Stocks fall after hot job data provides good and bad news

Source link Stocks fall after hot job data provides good and bad news

Related Articles

Back to top button