Wall Street’s three major stock indices closed lower on Friday after a solid jobs report ate in to hopes for a pause in the US Federal Reserve’s aggressive policy tightening which is needed to cool decades-high inflation.
The tech-heavy NASDAQ led the declines, falling 2.47 percent as shares of market heavyweights Apple Inc and Tesla Inc were the biggest drags on the market.
Earlier, the US Department of Labor’s closely watched report showed nonfarm payrolls rose by 390,000 jobs last month and wages grew, while the unemployment rate held steady at 3.6 percent — all signs of a tight labor market.
Photo: Reuters
Economists polled by Reuters had forecast that nonfarm payrolls would rise by 325,000 jobs.
While the jobs report was reassuring for the state of the economy, investors focused primarily on its potential influence on central bank policy.
“The market is trying to funnel its response through what the Fed may or may not do,” Automatic Data Processing Inc chief economist Nela Richardson said.
She said she expects the market to continue to seesaw as a result of uncertainty around interest rates and inflation.
Citi Personal Wealth Management head of investment strategy Shawn Snyder saw the solid report as a double-edged sword.
“It’s telling us the economy is in fairly good shape which is good news, but when viewed in the context of what it means for the Federal Reserve and tightening monetary policy it likely makes them more confident they can continue to tighten,” he said. “That comes through as a bit of a negative for investors because they’re hoping for the Fed to pause later this year.”
Money markets are fully pricing in 50 basis-point rate hikes by the Fed this month and next month.
While last month’s report showed a slower-than-expected increase in hourly earnings, which looked like good news for inflation, Snyder cited rising oil prices as an offsetting factor.
The Dow Jones Industrial Average fell 348.58 points, or 1.05 percent, to 32,899.7, the S&P 500 lost 68.28 points, or 1.63 percent, to 4,108.54 and the NASDAQ Composite dropped 304.16 points, or 2.47 percent, to 12,012.73.
Among the S&P’s 11 major sectors, consumer discretionary was the weakest with a 2.9 percent drop followed by technology’s 2.5 percent drop. The energy index, up 1.4 percent, was the only gainer of the pack, as oil prices rose.
For the week, the S&P 500 fell 1.2 percent, while the NASDAQ declined 0.98 percent and the Dow lost 0.94 percent, after all three indices had risen sharply the week before.
Volatility has gripped Wall Street in the past few weeks as investors debated whether markets had hit a bottom against the backdrop of some hawkish comments from Fed officials and data suggesting that inflation might have peaked.
“For right now, the economy looks OK, and the labor market as a signal of the real economy on Main Street looks incredibly solid,” said Richardson, adding that she sees inflation as “a threat to that outlook” even if it might have peaked.
“The peak is less relevant than the staying power of inflation and elevated rates,” she said. “That’s why wages in this report were so material. While wage growth may not drive up inflation past the peak, it could play a strong role in keeping inflation around these higher levels much longer than anybody wants or anticipates.”
iPhone maker Apple finished down 3.9 percent after a bearish brokerage outlook and a report that EU countries and lawmakers would agree next week on a common charging port for mobile devices and headphones — a proposal Apple has criticized.
Tesla shares sank 9.2 percent after chief executive Elon Musk, in an e-mail to executives seen by Reuters, said he has a “super bad feeling” about the economy and needs to cut about 10 percent of jobs at the electric vehicle maker.
Declining issues outnumbered advancing ones on the NYSE by a 2.68-to-1 ratio; on the NASDAQ, a 1.79-to-1 ratio favored decliners.
The S&P 500 posted 1 new 52-week high and 29 new lows, while the NASDAQ Composite recorded 32 new highs and 88 new lows.
On US exchanges 9.42 billion shares changed hands on Friday compared with the 12.89 billion average for the past 20 sessions.
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