The Morning Journal (Lorain, OH)
Stocks sink as job gains send bond yields higher
Stock prices fell again after the Labor Department said the economy continues to add jobs at a strong pace.
NEW YORK >> U.S. stock and bond prices fell again Friday after the Labor Department said the economy continues to add jobs at a strong pace, and investors worried about a three-day surge in yields.
The Department of Labor said employers added significantly more jobs in July and August than it previously thought, which made up for a slightly disappointing gain in September. That was another sign economic growth is likely to continue.
While that’s usually good news for stocks, the market stumbled this week as investors sold government bonds at a rapid pace. That pushed yields to their highest levels in more than seven years, a sign that investors are unsure how high and fast interest rates will rise.
Kate Nixon, the chief investment strategist for Northern Trust Wealth Management, said the decline in stock and bond prices started with comments by Federal Reserve Chairman Jerome Powell on Wednesday.
In a moderated discussion, Powell expressed confidence in the economy and said rising interest rates are a “long way” from holding back growth. Nixon said that means the Fed is intent on raising rates further, and investors aren’t sure when it intends to stop.
“The Fed is clearly no longer in the business of being accommodative and now the burden of proof is on the data to prove them wrong,” she said. Until last month, the Fed had described its policies as “accommodative,” or encouraging faster growth, since the Great Recession.
The S&P 500 index lost 16.04 points, or 0.6 percent, to 2,885.57. The Dow Jones Industrial Average dipped 180.43 points, or 0.7 percent, to 26,447.05.
Technology and internet companies and smaller, more U.S. focused companies continued to suffer steep losses. The Nasdaq composite skidded 91.06 points, or 1.2 percent, to 7,788.45. The Russell 2000 index lost 14.80 points, or 0.9 percent, to 1,632.11.
The Nasdaq dropped 3.2 percent this week and the Russell tumbled 3.8 percent. That was both indexes worst weekly loss in more than six months. The Russell index finished at its lowest level since late May.
The yield on the 10-year Treasury note jumped to 3.23 percent, its highest since May 2011, from 3.19 percent.
“It’s so unusual to see these kinds of dramatic moves in the U.S. Treasury market without there being some kind of Big Bang event,” said Nixon, of Northern Trust. “We haven’t seen anything like it since the (2016 presidential) election.”
While technology companies and retailers have been the biggest gainers on the S&P this year, they took steep losses this week. Banks and industrial and energy companies, which have struggled for most of 2018, changed place and finished with strong gains.