US stocks had another strong week, with the tech-heavy Nasdaq Composite ending the day down 1.3% to mark a sixth straight daily decline in its longest losing streak in more than three years.
The blue-chip S&P 500 fell 1.1 percent on Friday, bringing it down 3.3 percent for the week. The S&P 500 and Nasdaq are down for three straight weeks.
The moves came after U.S. Labor Department data showed a slight increase in the unemployment rate and a slower pace of job growth, to 315,000 in August from 526,000 in the month previous The details have failed to calm concerns that the Federal Reserve will continue to raise interest rates sharply as it fights inflation.
Employment data has been closely watched in recent months for clues about how aggressively the Fed will tighten monetary policy, with evidence of a hotter labor market fueling expectations of bigger and faster increases in interest rate
Conversely, signs of cooling job activity have helped reduce projections of how much the Fed will choose to raise borrowing costs as it struggles to strike a balance between curbing rapid price growth and push the US economy further into a prolonged slowdown.
“The labor market is moving in the right direction for policymakers,” said Jeffrey Roach, chief economist at LPL Financial. “A pick-up in unemployment coupled with a modest increase in the participation rate make the labor market in August less tight than in July.”
Stocks initially rose on news of the jobs report, but began to reverse those gains by mid-morning. The fall accelerated around lunchtime in New York after Gazprom, Russia’s state energy group, said it would shut the Nord Stream pipeline indefinitely in a move likely to exacerbate pressure on Europe’s energy supplies .
“News that Russia would keep the Nord Stream pipeline shut (it was scheduled to resume deliveries tomorrow) due to ‘mechanical problems’ helped pull [stocks] back in the red,” wrote Citi strategist Bill O’Donnell.
The three-week slide in U.S. stocks gathered momentum after the Fed’s annual symposium in Jackson Hole last week, in which Chairman Jay Powell reiterated the central bank’s commitment to taming inflation, saying that “they have to continue until the job is done.”
Expectations for Fed rate hikes cooled slightly after Friday’s jobs report, with federal funds futures trading suggesting markets expect the central bank to raise its key rate to 3.83 % in March 2023 from a projection of 3.95% at Thursday’s close. But the rate would still mark a significant increase from the Fed’s current target range of 2.25 to 2.50 percent, with major repercussions for the US economy.
While bets on the size of the Fed’s next rate hike in September have eased slightly, broad expectations are still closer to 0.75 percentage points than 0.5 percentage points.
“While some doors are closing for hiring, with a moderately slow payroll growth number, it is clearly at a fast enough pace to provide the Federal Reserve with an open door to pursue its top priority, rates plus current inflation losses,” said Rick Rieder. Head of Global Fixed Income Investments at BlackRock.
In government debt markets, the yield on the 10-year U.S. Treasury note fell 0.6 percentage points to 3.2%. The policy-sensitive two-year yield fell 0.1 percentage point to 3.4%, after hitting a 15-year high this week. Bond yields rise as bond prices fall.
Elsewhere, European shares extended gains after the release of jobs data, with the regional Stoxx 600 index adding 2 percent, ending five straight days of declines.