U.S. equities fell on Friday after the latest employment report showed the U.S. job market added jobs at a strong but slower pace in May.
The S&P 500 fell 1% in the morning trading, while the Dow Jones Industrial Average fell 156 points, or 0.5%, and the Nasdaq Composite fell 1.7%. All three indexes are on their way to weekly declines.
In bond markets, the U.S. Treasury’s 10-year benchmark yield rose 2.973% from 2.914% on Thursday. Yields and prices are reversed.
U.S. employers added 390,000 jobs last month, the slowest growth rate since April last year, while the unemployment rate remained at 3.6%. Wages grew 5.2% year-on-year, down from 5.5% in April.
Economists surveyed by The Wall Street Journal expected employers to add 328,000 jobs last month. And they saw the unemployment rate drop slightly to 3.5%, which would have equaled the 53-year minimum and its level in February 2020 before the Covid-19 pandemic spread to the US.
Federal Reserve officials are closely monitoring the state of the labor market as they decide how much and how quickly interest rates will rise in the coming months.
One point of concern for civil servants is that a strong labor market will increase inflation, as competition for workers increases the bargaining power of workers. Fed Vice President Lael Brainard said Thursday that she supported plans to raise interest rates by half a percentage point at a meeting later this month and again in July.
Frank Øland, chief strategist at Danske Bank, said before the report that he would look into whether wages grew last month. That, in addition to a slowdown in hiring, could cause markets to collide, he said.
“This is an unfortunate cocktail,” he said. “Then we have higher and higher inflation, and then the Fed will continue to tighten.”
Amid a record hiring streak in the US, economists are looking for signs of a possible turnaround. WSJ’s Anna Hirtenstein looks at how rising interest rates in the face of high inflation, market sales and the risk of recession are challenging the growth of the U.S. workforce. Photo: Olivier Douliery / AFP
Shares of Tesla fell 7% after Reuters reported that CEO Elon Musk wants to downsize the electric car maker’s staff. Mr. Musk earlier this week told employees to return to the office or look for work elsewhere.
Markets have experienced greater volatility in recent months as investors have tried to assess a mix of variables that has darkened their outlook and raised fears of a recession.
In the last two weeks, however, there has been a slight reduction in agitation.
Justin Wiggs, general manager of stock trading at Stifel Nicolaus, said that over the past week he has seen an increase in the number of buy orders among his clients, which he believes correlates directly with smaller fluctuations in stocks. the stock exchange.
The Wall Street Fear Indicator, the Cboe Volatility Index, is trading again in the mid-1920s, and the VVIX, a measure of the volatility of the VIX itself, is trading at its lowest level in two years. The VVIX is based on the prices of the volatility index options.
“Making the changes less and less bad has given some people comfort with the idea that maybe they can get the money back to work,” Mr. Wiggs.
A tightening of financial conditions by the Fed could dampen inflation, but it could also affect growth and the housing market. Russia’s war against Ukraine and China’s Covid zero-sum policy have added to supply chain disruptions, further fueling inflation.
Oil prices also remain above $ 100 a barrel, raising the cost of energy and fuel. Brent crude oil futures rose 0.4% to $ 118.08 a barrel.
“Now you have a very strong US economy, but we have this very high inflation that is not going down,” he said. Øland. “Ultimately, this will take consumers to a point where they could say we’re looking at our budget and maybe squeeze in a little bit here and there. If everyone stops a little bit, you’re moving toward recession.”
Abroad, the Stoxx Europe 600 pancontinental was roughly flat. Markets in the UK, Hong Kong and China were closed for holidays. Japan’s Nikkei 225 closed up 1.3%, while South Korea’s Kospi added 0.4%.
Traders working on the floor of the New York Stock Exchange.
Photo: Michael Nagle / Bloomberg News
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com
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