Stocks capped off a wild week of trading on Friday, when they continued to fall after the release of April jobs report revealed that the U.S. economy added more jobs than expected. It wasn’t necessarily the jobs report that hurt the market, which just remains in a bad way over broader economic concerns.
The Dow Jones Industrial Average closed down 99 points, or 0.3%. The S&P 500 slipped 0.6%, while the tech-heavy Nasdaq Composite dropped 1.4%. This continues a Thursday plummet for all three indexes that featured a 5% loss for the Nasdaq.
All told, the Dow, S&P and Nasdaq saw weekly losses of 0.2%, 0.2% and 1.5%, respectively, after rising Monday through Wednesday.
“US stocks appear to be on a permanent rollercoaster ride as investors debate continued signs of a strong economy alongside rising rates,” wrote Edward Moya, senior market analyst at Oanda.
The U.S. economy added 428,000 jobs in April, the Labor Department reported on Friday, beating expectations for 400,000 and matching March’s revised increase of 428,000 jobs. The unemployment rate remained at 3.6%, just above a prepandemic low, and wages grew 5.5% year over year.
While stocks were down, the bond market seemed to be at ease for the moment. The 2-year Treasury yield fell to 2.72% from 2.76% minutes before the report: That’s because the jobs result didn’t exactly crush expectations, and the March result was revised lower by 3,000. Plus, wage growth was slower compared to that seen in March. All of these data points indicate that high inflation may begin to slow down, which makes markets more comfortable with the idea that the Federal Reserve won’t lift interest rates any faster than currently expected.
The Fed said Wednesday that it is not currently considering hiking the benchmark lending rate by three quarters of a percentage point, so markets are forecasting half-point or quarter-point hikes from here.
“Average hourly earnings were flat over a two-month period, which should dramatically reduce the possibility of a 75 basis point move at the Fed’s next meeting,” wrote Eric Merlis, managing director of global markets at Citizens.
That slower pace of rate hikes could, in turn, support inflation for the long-term, which is partly why the 10-year Treasury yield rose to a new pandemic-era high of 3.13%.
That hurt tech stocks the most. Higher long-dated bond yields make future profits less valuable and many fast-growing tech companies are counting on a chunk of their profits to come many years in the future.
Overall, the stock market remains unable to dig itself out of its hole for reasons beyond just one jobs report.
Aside from worries about the Fed’s future monetary policy, the economic impact of which is still uncertain, Covid-related lockdowns in China, which restrict companies’ access to supplies, could make high inflation worse. Plus, there is the Russia-Ukraine war, which has already prompted Western nations to plan bans on Russian oil, bringing the price of the commodity higher.
The price of WTI crude oil gained more than 2% Friday, topping $110 a barrel, a level not seen since late March.
Higher oil and gas prices could eventually dent consumer spending, and the Invesco S&P 500 Equal Weight Consumer Discretionary Exchange-Traded Fund (RCD) dropped 1.8% Friday.
For the broader market, “investors believe an even deeper selloff may occur over the coming months with the Fed expected to once again raise interest rates by 50 basis points at the June meeting,” wrote Robert Schein, chief investment officer at Blanke Schein Wealth Management.
The stock market may just have unfinished business reflecting these economic risks.
“Whether this downturn lasts for another day, month or year, the current price action represents classic bear market behavior,” wrote Frank Cappelleri, chief market technician at Instinet.
He noted that the extent of the S&P 500’s drop-off from a multi-month peak in late March to date indicates the index could fall another 10% from here.
Here are five stocks on the move Friday:
Block (SQ) rose 0.7% after the payments group said gross profit for its Cash App rose 26% from a year earlier. The company posted first-quarter earnings on an adjusted basis of 18 cents a share, missing analysts’ forecasts by 2 cents.
DoorDash (DASH) stock slipped 1.4% after the company reported a loss of 48 cents a share, wider than the estimate for a loss of 21 cents a share, on sales of $1.46 billion, above expectations of $1.38 billion.
Shake Shack (SHAK) stock fell 2.4% after the company reported a loss of 19 cents a share, narrower than the estimated loss of 32 cents a share, on sales of $203.4 million, above expectations for $200.8 million.
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