Stock market posts 5th straight weekly decline
Latest pullback comes amid strong jobs report and Federal Reserve concerns
NEW YORK — A turbulent week on Wall Street ended Friday with more losses and the stock market’s fifth straight weekly decline.
The latest pullback came as investors balanced a strong U.S. jobs report against worries the Federal Reserve may cause a recession in its drive to halt inflation.
The S&P 500 ended with a loss of 0.6%, having come back from a 1.9% loss. Roughly 70% of the companies in the benchmark index fell.
The Dow Jones Industrial Average fell 0.3%, while the Nasdaq slid 1.4%. Both indexes also pared some of their losses from earlier in the day.
Investors focused on new data Friday showing U.S. employers continue to hire rapidly, and workers are getting relatively big raises, though short of inflation. The market’s reaction reflects concerns among investors that the strong numbers would keep the Fed on track for sharp and steady increases in interest rates to corral inflation, analysts said.
Friday’s choppy trading followed even wilder gyrations earlier this week, as all kinds of markets grapple with a new market order where the Federal Reserve is aggressively moving to yank supports for the economy put in place through the pandemic.
The Fed is hoping to raise rates and slow the economy enough to snuff out the highest inflation in four decades, but it risks choking off growth if it goes too far or too quickly. The Fed raised its key short-term interest rate this week by a half a percentage point, the largest such increase since 2000. It also said more increases that size are likely on the way.
Stocks nevertheless zoomed higher Wednesday afternoon, after latching onto a sliver of hope from Federal Reserve Chair Jerome Powell’s comments following the latest rate increase. He said the Fed was not “actively considering” an even bigger jump of 0.75 percentage points at its next meeting.
Jubilance was felt with the S&P 500 soaring 3% for its best day in nearly two years. It sobered up the next day, though, amid recognition that the Fed is still set to raise rates aggressively in its battle against inflation. The S&P 500 on Thursday lost all its prior day’s gains, plus a bit more, in one of its worst days since the early 2020 slump caused by the coronavirus pandemic.
That may be why stocks faltered Friday, after data showed hiring is still strong and pressure remains high on companies to raise workers’ pay.
“These data do not change the outlook for Fed policy; the rates trajectory remains upward in the near term,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a note.
Many factors driving inflation higher could linger well into 2022, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. The latest swings in the markets could mean investors are getting closer to better adjusting for the Fed’s aggressive policy shift, Samana said.