Wall St ends up with solid employment data that keeps up the pressure to raise rates

By Sinéad Carew, Devik Jain and Anisha Sircar

(Reuters) – US stock market indexes fell lower on Friday after a solid job report was included in hopes of a break in the aggressive tightening of Federal Reserve policy, which it is needed to cool decades of high inflation.

Shares of the heavyweights in the Apple Inc. (NASDAQ 🙂 and Tesla (NASDAQ 🙂 Inc. markets were also significant frictions in the market, which brought down the discretionary and technological consumer sectors while energy performed better. as oil prices rose.

Earlier, a close report from the Department of Labor showed that non-farm payrolls increased by 390,000 jobs last month and wages rose, while the unemployment rate remained stable at 3.6%. , all signs of a tight labor market.

Economists polled by Reuters had predicted that non-farm payrolls would rise by 325,000 jobs.

While the employment report was reassuring for the current state of the economy, investors focused primarily on its potential influence on central bank policy.

“The market is trying to channel its response through what the Fed may or may not do,” said Nela Richardson, chief economist at ADP, who hopes the market will continue to see it as a result of uncertainty over interest rates. interest and inflation.

Shawn Snyder, head of investment strategy at Citi Personal Wealth Management, saw the solid report as a double-edged sword.

“It’s telling us that the economy is in pretty good shape, which is good news, but when you look at it in the context of what it means for the Federal Reserve and the tightening of monetary policy, it probably makes them more sure they can continue to harden, “he said. “That’s a bit of a negative for investors because they expect the Fed to take a break by the end of the year.”

Money markets are setting prices at 50 basis point rate hikes by the Fed in June and July.

While the slower-than-expected rise in hourly earnings in the May report seemed like good news for inflation, Snyder cited the rise in oil prices as a compensating factor.

According to preliminary data, the S&P 500 lost 68.42 points, or 1.64%, to finish at 4,108.40 points, while the Nasdaq Composite lost 305.50 points, or 2.48%, to 12,011 , 40. The Dow Jones Industrial Average fell 351.39 points, or 1.06%, to 32,896.89.

Volatility has taken hold of Wall Street in recent weeks as investors debated whether markets had bottomed out against the backdrop of some falconry comments from Fed officials and data suggesting inflation may have peaked. .

“At the moment, the economy looks good. And the labor market as a sign of the real economy on Main Street looks incredibly solid,” said Richardson of ADP, adding that he sees inflation as a “threat to to these perspectives “, although he may have done so. reached the top.

“The peak is less relevant than the permanence of inflation and high rates,” he said. “That’s why wages in this report were so important. While wage growth may not drive inflation above the peak, it could play an important role in keeping inflation around these much higher levels. time that no one wants or anticipates “.

IPhone maker Apple fell after a bearish outlook and a report that EU countries and lawmakers would agree next week on a common charging port for mobile devices and headphones, a proposal Apple has criticized.

Tesla shares plummeted after CEO Elon Musk, in an email to executives seen by Reuters, said he has a “super bad feeling” about the economy and should cut about 10% of jobs in the electric car manufacturer.