Stocks tank, Treasury yields soar as jobs report dashes hopes Fed will pivot

US stocks plunged into a crater on Friday, their worst day since the throes of a sell-off in September after the government’s monthly employment report showed business conditions remained tight last month despite a slowdown in hiring – dashing any hopes that the Federal Reserve will Focusing on raising interest rates. .

US economy Add 263,000 jobs Last month the unemployment rate fell to 3.5%. Economists expected a salary gain of 255,000 and unemployment to remain at 3.7%, according to consensus estimates compiled by Bloomberg.

S&P 500 Index (^ Salafist Group for Preaching and Combat) is down 2.8%, while the Dow Jones Industrial Average is down (^ DJI) lost 630 points or 2.1%. Nasdaq Composite (^ ninth) led the way lower at 3.8%. Meanwhile, in the bond market, Treasury yields rose, with the benchmark 10-year note returning near 3.9% and the rate-sensitive two-year yield coming in at 4.3%.

Friday’s heavy selling pared much of the week’s gains after a fleeting period A two-day walk That started the month, lifted all three major averages by more than 5% from their 2022 lows. However, US stocks managed to end the week on a positive note, snapping a three-week losing streak. The S&P 500 is up 1.5%, the Dow is 2%, and the Nasdaq is up 0.7% since Monday.

“The negative market reaction could be a sign that investors are addressing the possibility of no change in the Fed’s tough playbook in the near term,” said Mike Lowengart, head of model portfolio creation at Morgan Stanley’s Global Investment Office, in a statement. note. “Keep in mind that the next Fed decision will only be made in early November, so more data, not least the inflation gauge, needs to be absorbed next week.”

Investors were betting on it Signs of a cold labor market That would force Fed policy makers to change course in the course of raising interest rates, especially after a string of weaker economic data showed Sharp contraction in manufacturing activity And the Fewer job opportunities. But many Wall Street strategists have argued that hopes of an imminent pivot are premature, a sentiment this jobs report appears to bolster.

In recent research notes, JPMorgan analysts said stock bulls will need monthly payroll readings as low as 100,000 to see the market shift the Fed’s outlook, while Bank of America analysts said the pivot won’t happen “until payrolls are affected.”

A team at Bank of America led by price research strategist Megan Swiber noted that “the Fed’s job is still far from over: expect the increases to continue until negative payrolls are nearly within reach.”

Moreover, Fed officials themselves have sent clear messages in recent weeks that there are no plans yet to undo aggressive political intervention.

“We have to go further,” Chicago Fed President Charles Evans said Thursday, noting that Benchmark rate likely to be at 4.5% to 4.75% By the spring of 2023.” “Inflation is now high and we need a more restrictive monetary policy setting. “

WASHINGTON, DC - JULY 26: Construction workers look outside the Marriner S. Eccles Federal Reserve building on July 26, 2022 in Washington, DC.  Officials at the Federal Open Market Committee (FOMC) are holding a two-day meeting where the Federal Reserve is expected to raise interest rates again this week to combat inflation.  (Photo by Anna Moneymaker/Getty Images)

WASHINGTON, DC – JULY 26: Construction workers look outside 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 This week’s rally in the wake of the heaviest OPEC + Production cuts since 2020. DataTrek Research has indicated that West Texas Intermediate (WTI) crude at more than $85 a barrel will prolong positive energy inflation trends until at least the beginning of 2023. The company also noted that oil prices are an “underappreciated anchor issue” of the Federal Reserve and market expectations for near-term economic growth.

West Texas Intermediate crude futures contractsCL = F.) settled at $92.65 a barrel on Friday, posting a 17% jump since Monday – the largest increase in one week since the start of the Russian invasion of Ukraine earlier this year.

Elsewhere in the market, chip makers came under pressure on Friday after Advanced Micro Devices (AMD) Lowered revenue guidance for the third quarter He cautioned against making “significant” inventory corrections across the computer supply chain. Shares were down nearly 14% to close Friday’s session. As was the burden on the sector Samsung reported its first profit drop since 2019another sign of the chip market turmoil.

Levi Strauss (fibrous) was also a mover on Friday after the retailer cut its guidance, citing headwinds from a stronger dollar, sluggish consumer demand and continued supply chain continuity. The stock closed down about 12%.

Meanwhile, DraftKing shares (DKING) up 3% after Bloomberg News reported Thursday that ESPN also Approaching a big new partnership deal With the sports betting company, citing sources familiar with the agreement.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed

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