Stock indexes close lower on jobs report
Investors reassess whether markets are too expensive
Wall Street capped a wobbly day of trading with a broad slide for stocks Friday, after a weak jobs report raised questions about the Federal Reserve’s time line to pare back its immense support for markets.
The S&P 500 fell 0.2% after wavering between small gains and losses for much of the day. The modest drop snapped a threeday winning streak for the benchmark index. Even so, it managed a 0.8% gain for the week, less than half of the index’s loss last week.
The Dow Jones Industrial Average fell 8.69 points, or less than 0.1%, to 34,746.25, while the Nasdaq composite slid 74.48 points, or 0.5%, to 14,579.54.
Wall Street reacted with uncertainty and disappointment to the highly anticipated September jobs report. U.S. stocks moved up and down throughout the day, as did Treasury yields.
The yield on the 10-year Treasury climbed to 1.60% from 1.57% late Thursday after initially dropping to 1.56% immediately following the jobs report’s release.
Small company stocks fell more than the broader market. The Russell 2000 index dropped 17 points, or 0.8%, to 2,233.09.
Much of Wall Street assumed the job market had improved enough for the Fed to soon begin paring back its monthly purchases of bonds meant to hold down longerterm interest rates. Investors had also pegged the central bank to begin lifting shortterm interest rates late next year. Current super-low interest rates have been one of the main forces driving stocks to record heights.
But Friday’s jobs report showed that employers added just a fraction of the jobs that economists expected. Many investors still expect the Fed to stick to its timetable, but the numbers were weak enough to at least raise questions about whether it may wait longer to taper its bond purchases or raise short-term rates.
“The miss on jobs isn’t pretty — there’s no way around it,” said Mike Loewengart, managing director of investment strategy at E-Trade Financial, in a statement. “And many may believe it will cause the Fed pause in terms of their tapering strategy. But the jury is
out on how the market will interpret the data.”
Inflation remains a big concern for investors after climbing to its highest level in at least a decade, in part because of snarled supply chains as the global economy reboots from its pandemiccaused shutdown. Those supply chain issues will be a key point for investors as they review companies’ next round of quarterly financial reports.
“Earnings season is really going to be the next catalyst for the market to understand where to go through the end of the year,” Hodge said.
Rising energy prices have also contributed to inflation, and benchmark U.S. crude for delivery in November briefly topped $80 a barrel early Friday. That’s the highest the frontmonth contract for U.S. oil has been since 2014.
Friday’s choppy trading extends an already volatile run since the S&P 500 set its record high on Sept. 2. A swift rise in interest rates and the prospect of less support from the Fed have forced investors to reassess whether stock prices have grown too expensive. Worries about higher interest rates have also combined with political turmoil.
The S&P 500 had four straight days through Tuesday where it alternated between a gain of 1% and a loss of 1%. In recent days, the market has been more stable amid relief that Congress looks like it will at least delay a default on the U.S. federal debt.