Stocks drop as jobs data hints at Fed hikes

By Stan Choe, Damian J. Troise and Alex Veiga AP BUSINESS WRITERS

NEW YORK — Stock indexes closed mostly lower Friday after a rollercoaster day following a blockbuster report on the U.S. jobs market that offered both good and bad news for Wall Street.

The benchmark S&P 500 ended just 0.2 percent lower after recovering from an early slide as investors reacted to the report, which showed that U.S. employers unexpectedly added hundreds of thousands more jobs than forecast last month.

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 selling amid the rising-rate worries. The tech-heavy Nasdaq composite cut its early losses and closed down 63.03 points, or 0.5 percent, at 12,657.55.

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 added 76.65 points, or 0.2 percent, to close at 32,803.47.

The S&P 500 slipped 6.75 points to end at 4,145.19. Both the S&P 500 and Nasdaq posted a gain for the week.

Wall Street’s clearest moves came 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 3.23 percent from 3.05 percent late Thursday. The 10year yield, which influences rates on mortgages, rose to 2.84 percent from 2.69 percent.

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 shortterm 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.