US stocks head for 3rd straight weekly loss after giving up gains seen on ‘Goldilocks’ jobs report

U.S. stocks fell on Friday afternoon, with all three major benchmarks falling after data showed the U.S. economy added more than 300,000 jobs last month. Stocks had risen earlier in the session as the August jobs report appeared to be right in the sweet spot of investor expectations.

How do stocks trade?
  • The Dow Jones Industrial Average DJIA,
    fell 276 points, or 0.9%, to 31,380.

  • The S&P 500 SPX,
    fell 39.5 points, or 1%, to 3,927.

  • The Nasdaq Composite COMP,
    fell 159 points, or 1.4%, to about 11,626.

The Dow and S&P 500 were looking to close out consecutive gains after ending a four-day losing streak on Thursday. All three major indices were on a weekly downward trajectory.

What drives the markets

Stocks gave up gains on Friday afternoon after initially finding support after the August jobs report showed the U.S. economy added 315,000 new jobs last month, roughly in line with expectations for 318,000 jobs in a survey of economists. of the Wall Street Journal.

It was “a bullish report” as it was “not too hot” while showing the labor market remains “fairly strong” as the Federal Reserve aims to fight inflation by cooling the economy through rate hikes, according to Anthony Saglimbene, head market strategy. at Ameriprise Financial.

“From a market perspective, it keeps the discussion of a 50 or 75 basis point move by the Fed at the end of the month on the table,” Saglimbene said by phone on Friday, referring to the likely size of the central bank’s next rate hike. at its meeting on September 20-21. “Market odds suggest they move 75 basis points, but with today’s jobs report, I think the inflation data later this month will be the key data.”

While the core jobs number for August was in line with expectations, the jobless rate surprised economists as it climbed to 3.7%, from 3.5% in July. Of course, this increase is largely due to the rise in the labor force participation rate which rose to 62.4% from 62.1%.

“More workers are coming in and I think that’s a positive thing given how many jobs we have open right now,” Saglimbene said. “The only bright spot for the economy was jobs.”

In other economic news, orders for manufactured goods fell 1 percent in July, the Commerce Department said Friday, beating expectations for a 0.2 percent rise. The drop in orders marked the first drop after nine consecutive monthly gains.

Other analysts also saw August’s job gains as neither too hot nor too cold.

“It looks like a Goldilocks number, it’s kind of right where the expectations were,” Larry Cordisco, co-chief portfolio manager of the Osterweis Growth and Income Fund, said in a telephone interview.

“It’s not showing a lot of slowdown or a lot of acceleration, so I think combined with the overall market position, it’s positive for stocks today,” he said. “We’ll see if that’s the case, but that’s the initial reaction.”

According to Ron Temple, head of U.S. equities at Lazard Asset Management, the jobs report reinforced the perception that the Fed may raise interest rates by 75 basis points for a third straight time when policymakers meet later this month.

“A rate hike of 75 basis points is almost certain at this point,” Temple said.

Some feared that a repeat of July’s report, which showed more than 500,000 jobs created in a month, could push the Fed to be even more aggressive in its monetary policy.

I see: Trading on ‘Goldilocks’ jobs report could be risky as S&P 500 faces tough technical resistance

Bond yields fell in the wake of the August jobs report.

The 2-year Treasury TMUBMUSD02Y,
the yield traded 12 basis points lower at around 3.41%, while the 10-year yield TMUBMUSD10Y,
fell five basis points to 3.22%, according to FactSet data, last checked. The larger drop in the 2-year rate is a sign that traders may expect a less aggressive rate hike, which tends to have a big impact on short-term yields.

Friday’s drop in 2-year and 10-year yields appeared to bring some initial relief to the stock market, as their rally last week was a “headwind for stock prices,” according to Ameriprise’s Saglimbene.

“We’ll just have to see where the Fed steers monetary policy,” he said, “but I think the big rate hike this year is in the rearview mirror.”

Energy SP500.10,
was the S&P 500’s best-performing sector on Friday afternoon, up more than 2%, according to FactSet data, at last check. Small-cap stocks also traded higher, with the Russell 2000 RUT,
0.5% climb.

Stocks are the focus
  • Starbucks Corporation
    Shares fell about 2% as the company named Laxman Narasimhan to take over as CEO.

  • Broadcom Inc.
    Shares rose 2.2% after the company’s latest earnings report.

  • A jump in crude oil prices helped support shares of oil and gas companies such as APA Corp.APA,
    Halliburton Co.
    and Marathon Oil Corp.
    West Texas Intermediate crude CLV22,
    for October delivery rose 0.3% to $86.87 a barrel in recent trade after a G-7 plan to try to rein in Russian oil prices.

  • Lululemon Athletica
    rose 7.2% on strong earnings.

– Steve Goldstein contributed to this report.

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