Worries about a too-hot job market are sending Wall Street lower Friday, and stocks are on track to close out a fifth straight losing week with more drops. The S&P 500 was 0.8% lower in early trading and heading for its longest weekly losing streak in 16 months. The Dow Jones Industrial Average was down 196 points, or 0.6%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.8% lower.
The Associated Press has the story:
Wall Street sinks after jobs data that may keep inflation high
Newslooks- NEW YORK (AP)
Worries about a too-hot job market are sending Wall Street lower Friday, and stocks are on track to close out a fifth straight losing week with more drops.
The S&P 500 was 0.8% lower in early trading and heading for its longest weekly losing streak in 16 months. The Dow Jones Industrial Average was down 196 points, or 0.6%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.8% lower.
Once again, it was rising yields in the bond market pushing stocks lower. Yields leaped after a report said U.S. employers added nearly twice as many jobs last month as economists expected.
Such strength for hiring is normally a good sign for financial markets because it means the economy is doing well and corporate profits can too. But in this new normal of high inflation, the worry on Wall Street is too much strength in the job market will end up pushing companies to keep raising prices for their products. That upward pressure on inflation could in turn force the Federal Reserve to keep interest rates high for a longer time than expected.
Wall Street hates high interest rates because they knock down prices for all kinds of investments. And even though the job market has been powering through the Fed’s pulling its main interest rate to the highest level since 2001, high rates work to extinguish high inflation by slowing the entire economy. That raises the risk of a recession later on.
Trading could be shaky through the day, though, as Friday’s jobs report also included some more encouraging nuggets for the inflation fighters at the Federal Reserve.
“The blow-out jobs report is maybe not so good news for markets,” said Seema Shah, chief global strategist at Principal Asset Management.
“Markets want the perfect landing,” she said about the possibility of an economy that’s slowing just enough to undercut high inflation but not so much that it causes a painful recession, “and instead they are facing an upward sloping path.”
Treasury yields soared following the jobs report. The yield on the 10-year Treasury jumped to 4.85% from 4.72% late Thursday and again is near its highest level since 2007.
Shorter-term yields were swinging, though, as economists pointed to some more encouraging data within the jobs report. The two-year Treasury yield more closely tracks expectations for action by the Fed than the 10-year yield, for example, and it quickly soared from 5.04% just before the release of the jobs report to 5.20% shortly afterward. It then pared its gain to pull back to 5.07%.
Among the potentially encouraging signals for the Fed: Workers’ average wages rose at a slower rate in September than economists expected. While that’s discouraging for workers trying to keep up with inflation, it could remove some inclination by companies to raise their prices.
The Fed should be focusing on such moderate wage gains, rather than the growth in jobs, said Brian Jacobsen, chief economist at Annex Wealth Management.
“The labor market isn’t overheating, it’s still healing,” he said.
Average hourly earnings rose at the slowest rate, on a year-over-year basis, since June 2021.
“Like most reports, Fed will find things to like and dislike here,” according to Andrew Patterson, senior economist at Vanguard.
That raises the stakes for upcoming reports next week on inflation at both the consumer and wholesale levels. They’re the next huge data points coming before the Fed’s next meeting on interest rates, which ends Nov. 1.
High interest rates tend to hit technology and other high-growth stocks particularly hard, and Big Tech was helping to lead the market lower.
A 2.9% drop for Tesla and 1% fall for Amazon were two of the heaviest weights on the S&P 500.
Stocks of oil-and-gas producers were also sinking, including a 2.2% drop for Chevron.
They’ve been dropping as prices for crude oil have pulled back sharply over the last week. A barrel of benchmark U.S. crude slipped 0.2% to $82.18, while Brent crude, the international standard, added 0.5% to $84.51.
The come down for oil prices from above $93 per barrel last week has helped to offer some relief on the inflation front, after crude had charged higher from $70 in the summer.
In stock markets abroad, indexes were mostly higher across much of Europe and Asia. Japan’s Nikkei 225 was an outlier and slipped 0.3%.
