clearn.png
Thursday August 11th, 2022 11:32PM

Stocks falling as hot jobs data suggests Fed hikes not over

By The Associated Press
Related Articles
  Contact Editor

NEW YORK (AP) — Stocks are swinging lower through a roller-coaster Friday following a blockbuster report on the U.S. jobs market that offered both good and bad news for Wall Street.

The S&P 500 was back down 0.5% in afternoon trading after briefly recovering from early losses. Other stock indexes were similarly shaky as U.S. employers unexpectedly accelerated their hiring last month and added hundreds of thousands more jobs than forecast.

The blistering data suggests the economy may not be in a recession, as feared. But it also undercuts investors' speculation that a slowing economy may mean a peak for inflation soon. That means the Federal Reserve may not let up on its aggressive rate hikes to combat inflation as early as hoped. And much of Wall Street still revolves around expectations for rates.

“It's a reminder for investors on how uncertain Fed policy is going forward and the strong jobs market data shows just how far the Fed has to go,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Stocks of technology and other high-growth companies once again took the brunt of the losses amid the rising-rate worries, and the Nasdaq composite fell 0.8%, as of 2:18 p.m. Eastern time.

The good news on the jobs market helped to limit losses for the Dow Jones Industrial Average, whose stocks tend to move more with expectations for the overall economy. It was down 0.1%, or 21 points, at 32,705.

Beyond the nation’s strong hiring, wage growth for workers also unexpectedly accelerated last month. That's helpful for households trying to keep up with the fastest price gains in 40 years. But it also raises worries on Wall Street that inflation will become more embedded in the economy.

Higher wages can cause companies to raise prices for their own products to sustain profits, which can lead to something economists call a “wage-price spiral.”

To be sure, some market watchers also pointed to numbers within Friday’s employment report suggesting the jobs market may not be as strong as the overall numbers imply. The number of people with multiple jobs rose by more than half a million, for example, said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

“That was mostly from people who already have a full time job and then the second job is part time,” he said. “Maybe this is more superficially impressive than substantively impressive.”

Wall Street's clearest moves were coming from the bond market, where Treasury yields shot higher immediately after the release of the jobs data. The two-year Treasury yield, which tends to track expectations for Fed action, jumped to 3.21% from 3.05% late Thursday. The 10-year yield rose to 2.84% from 2.69%.

Wall Street is coming off the best month for stocks since late 2020, a rally driven mostly by what had been falling yields across the bond market. The hope on Wall Street had been that the economy was slowing enough to get the Fed to ease up on its rate hikes.

Higher mortgage rates had cut into the housing industry, in particular, after the Fed raised its short-term rates four times this year. The last two increases were triple the usual size, and the Fed has raised its benchmark overnight rate from nearly zero by 2.25 percentage points.

“Today's print, coming in much stronger than anticipated, complicates the job” of the Federal Reserve, Rick Rieder, BlackRock’s chief investment officer of global fixed income, said in a statement. He said the assumption now becomes the Fed raising short-term rates by another 0.75 percentage points next month, unless next week's highly anticipated report on inflation “shows some dramatic weakness, which seems highly unlikely at this point.”

Traders scrambled to place bets for bigger hikes coming out of the Fed’s next meeting. They have flipped their expectations from a day earlier and now largely expect the Fed to hike by 0.75 percentage points, instead of by half a point.

Such increases hurt investment prices in the near term, and they raise the risk of recession further down the line because they slow the economy by design.

Such expectations also mean the two-year Treasury yield remains above the 10-year yield. That’s unusual, and some investors see it as a sign of a recession hitting the economy within the next year or two.

On Friday, Warner Bros. Discovery fell 16.4% for the biggest loss in the S&P 500 after reporting weaker results for the latest quarter than analysts expected. Monster Beverage lost 4.5% after it reported weaker profit than expected, though its revenue was stronger than forecast.

In overseas stock markets, India's Sensex rose 0.2% after the Reserve Bank of India raised its benchmark interest rate by a half percentage point to 5.4%.

Japan's Nikkei 225 rose 0.9%, while Germany's DAX fell 0.6%.

___

Veiga reported from Los Angeles.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Financial Markets
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Stocks falling as hot jobs data suggests Fed hikes not over
Stocks are swinging lower Friday following a blockbuster report on the U.S. jobs market that suggested the Fed won't soon rein in its aggressive rate hikes
1:03PM ( 6 minutes ago )
Economist: Alex Jones, his company worth up to $270 million
An economist says conspiracy theorist Alex Jones and his company Free Speech Systems are worth up to $270 million
12:55PM ( 15 minutes ago )
More storms bring renewed flood threat in hard-hit Kentucky
Thunderstorms have returned to parts of Kentucky already reeling from devastating floods
12:51PM ( 19 minutes ago )
Associated Press (AP)
Musk countersuit accuses Twitter of fraud
Elon Musk accused Twitter of fraud in a countersuit over his aborted $44 billion deal for the social media company, which he said held back necessary information and misled his team about its true user base
12:24PM ( 46 minutes ago )
US agency probes Tesla crashes that killed 2 motorcyclists
Two crashes involving Teslas apparently running on Autopilot are drawing scrutiny from federal regulators and point to a potential new hazard on U.S. freeways: The partially automated vehicles may not stop for motorcycles
12:08PM ( 1 hour ago )
Amazon to buy vacuum maker iRobot for roughly $1.7B
Amazon on Friday announced it has entered into an agreement to acquire the vacuum cleaner maker iRobot for approximately $1.7 billion
12:06PM ( 1 hour ago )
AP Business
US stocks falling after red-hot jobs report; Warner -15%
Stocks are opening lower on Wall Street Friday following much stronger than expected hiring data from the Labor Department
9:48AM ( 3 hours ago )
US stock futures sink after red-hot jobs report, yields jump
Stocks in the U.S. fell in premarket trading after a hotter-than-expected report on hiring suggested the Federal Reserve will have to stay aggressive in its efforts to fight inflation
9:19AM ( 3 hours ago )
Democrats say they've reached agreement on economic package
Senate Democrats say they have reached an accord on changes to their marquee economic legislation, clearing the major hurdle to pushing one of President Joe Biden’s leading election-year priorities through the chamber in coming days
8:48AM ( 4 hours ago )
AP Business - Economy
World stock markets mixed ahead of US jobs data
Global stock markets and Wall Street futures are mixed ahead of an update on the health of the U.S. jobs market while the Federal Reserve weighs whether more rate hikes are needed to cool surging inflation
5:24AM ( 7 hours ago )
Asian stock markets rise ahead of US jobs data
Asian stock markets are higher ahead of an update on the health of the U.S. jobs market while the Federal Reserve weighs whether more rate hikes are needed to cool surging inflation
2:12AM ( 10 hours ago )
WNBA's Griner convicted at drug trial, sentenced to 9 years
A judge in Russia convicted American basketball star Brittney Griner of drug possession and smuggling
10:27PM ( 14 hours ago )
AP Business - Financial Markets
Economist: Alex Jones, his company worth up to $270 million
An economist says conspiracy theorist Alex Jones and his company Free Speech Systems are worth up to $270 million
12:55PM ( 15 minutes ago )
More storms bring renewed flood threat in hard-hit Kentucky
Thunderstorms have returned to parts of Kentucky already reeling from devastating floods
12:51PM ( 19 minutes ago )
Hourly workers still have leverage as US hiring booms
As inflation skyrockets, hourly workers keep changing jobs in pursuit of higher wages
12:50PM ( 20 minutes ago )
Israeli strikes on Gaza kill 8, including senior militant
Palestinian officials say Israeli airstrikes on Gaza have killed at least eight people, including a senior militant, and wounded 40 others
12:42PM ( 28 minutes ago )
Doctor critical of lax COVID rules wins Tenn. Dem gov race
A Nashville doctor critical of Republican Gov. Bill Lee's hands-off approach to the COVID-19 pandemic has won the Democratic nomination for governor
12:35PM ( 34 minutes ago )