By STAN CHOE and DAMIAN J. TROISE
NEW YORK (AP) – US equities fell sharply on Friday, pulling major indices to the red during the week as Wall Street focused on the still strong US job market downside.
A report showed that employers hired more workers last month than economists expected. While this is a good sign for the economy amid worries about a possible recession, many investors saw it holding the Federal Reserve on its way to aggressively raising interest rates. These moves would slow the economy in hopes of ending high inflation, and the Fed runs the risk of causing a recession if it moves too fast or too far. Meanwhile, higher interest rates are putting downward pressure on equities and other investments.
The S&P 500 index fell 68.28 points, or 1.6%, to 4,108.54. This is a reversal of market movements on Thursday, when a smaller report on the U.S. labor market came in weaker than expected. This reinforced speculation, the Fed may consider a pause in rate hikes later this year, and hopes of a less aggressive Fed blew up stocks.
Friday’s slide also dragged the benchmark S&P 500 to its eighth weekly loss in the last nine. The most atypical in this stretch was last week, when stocks roared in part from speculation that the Fed would consider a pause in interest rate hikes in September.
The Dow Jones Industrial Average fell 348.58 points, or 1%, to 32,899.70. The Nasdaq fell 304.16 points, or 2.5%, to 12,012.73.
Bitcoin also fell, while a measure of concern on the stock market rose, although some signs of glass half full of inflationary pressures were buried within the employment data.
The U.S. government’s comprehensive report on Friday showed that employers added 390,000 jobs last month, better than expectations of 322,500. This boosted Treasury yields, although they initially faltered as investors shifted from one abrupt reaction to another after the report was released.
The two-year Treasury yield, which tends to move in line with the Fed’s expectations for action, rose to 2.68% from 2.62% just before the report was released. The 10-year yield, which follows long-term growth and inflation expectations, rose to 2.95% from 2.91% after rising to 2.99%.
The report contained some signals that analysts said could make the Fed less aggressive, and mixed data could cause markets to fluctuate through Friday. Big daily changes have become the norm recently, as Wall Street struggles to prevent Fed aggression.
Workers’ average wages were slightly weaker in May than economists expected. While this is discouraging for people who see prices at the grocery store and the gas pump jumping higher than their paychecks, it could mean less future pressure on inflation across the economy. In addition, the country’s employment growth slowed last month, although it was better than expected.
“The employment situation remains strong for the economy, but there are some signs of a slowdown,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “The signs are not clear and convincing enough to suggest that the Fed has yet to pause, but many things may change over the coming months.”
More than four out of five S&P 500 shares fell amid worries about rising rates, with the biggest losses affecting technology stocks and other big world winners of previous low interest rates.
Tesla fell 9.2% after U.S. safety regulators said more than 750 homeowners had complained that cars suddenly stopped on the roads for no apparent reason while operating their partially driven systems. automated. A report also said Tesla is considering the layoffs amid concerns by its CEO Elon Musk about the economy. As Tesla is the fifth largest company in the S&P 500, its movements have a greater weight in the index.
Walmart companies on Delta Air Lines have recently noticed how inflation is consuming their profits, which has increased pressure on markets as stock prices tend to follow long-term profits. Warnings add to market concerns about Russia’s invasion of Ukraine and anti-VOCID measures that are holding back business in China.
“There are so many uncertainties,” said John Lynch, chief investment officer of Comerica Wealth Management. “You can’t put Ukraine on a spreadsheet and you can’t put locks on China on a spreadsheet.”
JPMorgan Chase CEO Jamie Dimon said earlier this week that he is preparing his company for a possible economic “hurricane”, highlighting the lower financial support from the US government and the Federal Reserve, as well as the war in Ukraine.
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AP business writer Yuri Kageyama contributed.