U.S. stocks head for 3rd straight weekly loss after giving up gains seen on ‘Goldilocks’ jobs report
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U.S. stocks turned lower Friday afternoon, with all three major benchmarks falling, after data showed the U.S. economy added more than 300,000 jobs last month. Stocks had been up earlier in the session, as the August jobs report was seen right in the sweet spot of investors’ expectations.
How stocks are trading
-
The Dow Jones Industrial Average
DJIA,
-0.63%
was down 276 points, or 0.9%, at 31,380. -
The S&P 500
SPX,
-0.70%
fell 39.5 points, or 1%, to 3,927. -
The Nasdaq Composite
COMP,
-1.02%
dropped 159 points, or 1.4%, to about 11,626.
The Dow and S&P 500 had been attempting to book back-to-back gains after ending four-day losing streaks on Thursday. All three major indexes were on track for weekly declines.
What’s driving markets
Stocks gave up gains Friday afternoon after initially find support after the August jobs report showed the U.S. economy added 315,000 new jobs last month, roughly in line with expectations of 318,000 jobs from a survey of economists by The Wall Street Journal.
It was “a goldilocks report” as it was not “too hot” while showing the labor market remains “pretty strong” as the Federal Reserve aims to fight inflation by cooling the economy through interest rate hikes, according to Anthony Saglimbene, chief market strategist at Ameriprise Financial.
“From a market perspective, it keeps the debate of a 50 or 75 basis points move by the Fed at the end of the month on the table,” Saglimbene said by phone Friday, referring to the potential size of the central bank’s next rate hike at its Sept. 20-21 meeting. “Market odds are suggesting they move 75 basis points, but with today’s labor report, I think the inflation data later this month is going to be the key data.”
While the headline jobs number for August was in line with expectations, the unemployment rate surprised economists by climbing to 3.7%, from 3.5% in July. To be sure, this increase was largely driven by an uptick in the labor-force participation rate which rose to 62.4% from 62.1%.
“More workers are coming into the fold and I think that’s positive given how many jobs we have open right now,” said Saglimbene. “The one bright spot for the economy has been jobs.”
In other economic news, orders for manufactured goods fell 1% in July, the Commerce Department said Friday, confounding expectations for a 0.2% gain. The drop in orders marked the first decline after nine straight monthly gains.
Other analysts also viewed August’s jobs gains as neither too hot nor too cold.
“It looks like a Goldilocks number, it’s sort of right where expectations were,” said Larry Cordisco, co-lead portfolio manager of the Osterweis Growth and Income Fund, in a phone interview.
“It’s neither showing a big slowdown or too hot of an acceleration, so I think that combined with the overall positioning in the market, it’s a positive for stocks today,” he said. “We’ll see if it holds but that’s the initial reaction.”
In the view of Ron Temple, head of U.S. equity at Lazard Asset Management, the jobs report solidified the perception that the Fed may raise its benchmark rate by 75 basis points for a third time in a row when policy makers meet later this month.
“A 75 basis point rate hike is nearly certain at this point,” said Temple.
Some had feared that a repeat of July’s blockbuster report, which showed more than 500,000 jobs created in the span of a month, might pressure the Fed to be even more aggressive in its monetary policy.
Treasury yields were down in the wake of the jobs report for August.
The 2-year Treasury
TMUBMUSD02Y,
yield was trading 12 basis points lower at around 3.41%, while the 10-year yield
TMUBMUSD10Y,
was down five basis points at 3.22%, according to FactSet data, at last check. The larger drop in the 2-year rate is a sign that traders may be anticipating a less-aggressive pace of interest-rate hikes, which tend to have an outsize impact on short-term yields.
Friday’s decline in 2-year and 10-year Treasury yields appeared to bring some initial relief to the equities market, as their climb over the past week or so has been “a headwind for stock prices,” according to Ameriprise’s Saglimbene.
“We’ll just have to see where the Fed guides monetary policy,” he said, “but I do think the big spike in rates this year is in the rearview mirror.”
Energy
SP500.10,
was the best performing sector of the S&P 500 on Friday afternoon, with gains of more than 2%, according to FactSet data, at last check. Small-cap stocks also traded higher, with the Russell 2000
RUT,
climbing 0.5%.
Stocks in focus
-
Starbucks Corporation
SBUX,
-2.55%
shares fell around 2% as the company named Laxman Narasimhan to take over as CEO. -
Broadcom Inc.
AVGO,
+2.13%
shares advanced 2.2% following the company’s latest earnings report. -
A jump in crude-oil prices helped support shares of oil-and-gas companies like APA Corp.,
APA,
+2.26%
Halliburton Co.
HAL,
+3.63%
and Marathon Oil Corp.
MRO,
+2.81%
West Texas Intermediate crude
CLV22,
+0.38%
for October delivery was up 0.3% at $86.87 a barrel in recent trade following a G-7 plan to try to cap prices on Russian oil. -
Lululemon Athletica
LULU,
+7.46%
rallied 7.2% on strong earnings.
––Steve Goldstein contributed to this report.
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