Stocks Sink, Treasury Yields Rise as Wall Street Worries About Jobs Report

US stocks fell on Friday as Wall Street weighed in on the government’s monthly employment report, which showed working conditions remained tight in September, despite a slowdown in hiring.

The US economy added 263,000 jobs last month as the unemployment rate fell to 3.5%. Economists had expected a payroll increase of 255,000 and unemployment to remain at 3.7%.

The S&P 500 (^GSPC) fell 1.8%, while the Dow Jones Industrial Average (^DJI) fell nearly 400 points, or 1.3%. The Nasdaq Composite (^IXIC) led the way lower, falling 2.5%. Meanwhile, in the bond market, Treasury yields soared, with the benchmark 10-year note jumping 7 basis points to 3.9% and the 2-year yield jumping 8 basis points to 4.3% after the release. .

“The negative market reaction may be a sign that investors are processing the likelihood that there will be no change to the Fed’s aggressive playbook any time soon,” said Mike Loewenart, head of model portfolio construction at the Fed. Morgan Stanley Global Investment Office, in a statement. Note. “Keep in mind that the next Fed decision isn’t until early November, so a lot more data will need to be digested, including next week’s inflation gauge.”

Investors were betting that signs of a cooling labor market would force Federal Reserve officials to reverse course on their aggressive rate-hike path, particularly after a series of weaker economic reports showed a sharp contraction in manufacturing activity and fewer vacancies. But many Wall Street strategists have argued that hopes of an imminent turnaround are premature, a sentiment this jobs report appears to reinforce.

In recent research notes, JPMorgan analysts said equity bulls would need a monthly payroll print as low as 100,000 for the market to alter their Fed expectations, while Bank of America analysts said no. there will be a turnaround “until payrolls bite.”

“The Fed’s job is still far from over: expect increases to continue until negative payrolls are almost in,” said a BofA team led by rate research strategist Meghan Swiber.

Furthermore, Fed officials themselves have sent clear messages in recent weeks that there are as yet no plans to withdraw from aggressive policy intervention.

“We have more ways to go,” Federal Reserve Bank of Chicago President Charles Evans said Thursday, indicating the benchmark rate will likely be between 4.5% and 4.75% by spring 2023.” Inflation is high right now and we need a more restrictive policy.” establishment of monetary policy.

WASHINGTON, DC – JULY 26: Construction workers view the exterior of the Marriner S. Eccles Federal Reserve Building on July 26, 2022 in Washington, DC. (Photo by Anna Moneymaker/Getty Images)

US crude oil futures continued to rise this week following OPEC+’s biggest production cut since 2020. DataTrek Research noted that West Texas Intermediate (WTI) crude oil above $85 a barrel will prolong the positive trends in the energy inflation until at least early 2023 The firm also noted that oil prices are an “underestimated fundamental issue” for the Federal Reserve and market expectations of near-term economic growth. WTI futures traded above $90 a barrel early Friday, up $10 this week.

Elsewhere, chipmakers were under pressure Friday morning after Advanced Micro Devices (AMD) lowered its third-quarter revenue guidance and warned of “significant” inventory corrections across the PC supply chain. . Shares sank 9% at the beginning of the session. Samsung also weighed in on the sector by reporting its first profit decline since 2019, another sign of a troubled chip market.

Levi Strauss (LEVI) also moved on Friday after the retailer cut its guidance, citing headwinds from a stronger dollar, slowing consumer demand and persistent supply chain. The stock fell almost 9% on Friday.

Meanwhile, shares of DraftKing (DKING) rose 4% after Bloomberg News reported on Thursday that ESPN is nearing a big partnership deal with the sports betting company, citing sources familiar with the deal.


Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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