Stocks slump after murky jobs report as markets swing

A week of volatile swings on Wall Street ended Friday with more losses for stocks, as a mixed batch of U.S. job market data triggered another bout of dizzying trading.

The S&P 500 closed 0.8% lower after erasing a 0.7% gain in the early going. The benchmark index was coming off a jolting stretch where it swerved by at least 1.2% in five straight days, pounded by uncertainty about how badly the newest coronavirus variant will hit the economy and about when the Federal Reserve will halt its immense support for financial markets.

The Dow Jones Industrial Average slipped 0.2%, and the Nasdaq composite lost 1.9%. The Russell 2000 index of company stocks slumped 2.1%. All the indexes also posted a weekly loss.

Treasury yields fell, rose and fell again as investors struggled to square what the jobs report means the Federal Reserve will do on interest rates. The erratic movements fit right in with a week where the S&P 500 swung from a 1.9% gain to a 1.2% loss in one day.

“We got some mixed messages on the data” from the jobs report, “and that can make for some messy markets,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

The report, usually the most anticipated economic data by Wall Street each month, showed employers added only 210,000 jobs last month. It was a disappointing result when economists were expecting much stronger hiring of 530,000, and it raised worries the economy may stagnate while inflation remains high. That’s a worse-case scenario called “stagflation” by economists, and the omicron variant’s arrival makes its likelihood more uncertain.

But other areas of the jobs report showed better strength. More people are coming back to the workforce, and the unemployment rate improved to 4.2% from 4.6%.

Those encouraging numbers helped Treasury yields briefly climb during the morning. But they also came from a section of the jobs report that usually takes a back seat in investors’ eyes to the jobs-growth figure. That’s because they come from different surveys, one of employers and the other of households, and many investors see the job-growth numbers as the more reliable ones historically.

“Today’s non-farm payroll report looks messy to me,” said Jamie Cox, managing partner for Harris Financial Group. “Best to wait for the revisions next month before sounding the stagflation alarm too loudly.”

Some investors said the jobs report ultimately could push the Fed to get more aggressive about raising short-term interest rates off their record low. Others, though, said they expected the mixed report to have no effect, and the wide differences in opinion helped lead to the day’s sharp swings in the market.

What the Fed decides is a huge deal for stocks because low interest rates have been one of the main reasons the S&P 500 has nearly doubled since the early days of the pandemic. Low rates encourage borrowers to spend more and investors to pay higher prices for stocks.

The Fed has begun slowing its program to buy billions of dollars of bonds each month to support the economy and markets. Chairman Jerome Powell jolted markets this week when he said the Fed could wrap up its bond-buying program months before the June target. That would open the door for the Fed to raise short-term rates.

“With the headlines on omicron and then figuring out if a faster taper also means a sooner hike — and investors worrying if the Fed is going to make a mistake — it’s to be expected we’re going to see some of this volatility,” Jacobsen said.