Strong jobs report sinks stock market

NEW YORK — Stocks fell broadly on Wall Street Thursday as worries about a possible recession and rising bond yields put the squeeze back on markets.

The S&P 500 fell 2.1%, reaching its lowest level since late 2020. The washout erased the index’s gains in a big rally the day before. That’s when forceful moves by the Bank of England to get suddenly spiking U.K. yields under control led to a global burst of relief among investors.

The Dow Jones Industrial Average fell 1.5% and the Nasdaq composite lost 2.8%. The Russell 2000 index dropped 2.4%.

The major indexes are on pace for a weekly loss to wind up what has been a dismal month for Wall Street. With one day left in September, the benchmark S&P 500 is down about 8% for the month.

For markets to turn higher, analysts say investors will need to see a break from the high inflation that’s swept the world.

That hasn’t happened yet, with even more data arriving Thursday showing the opposite. And that means the Federal Reserve and other central banks will likely keep pushing interest rates higher to slow their economies in hopes of pushing down inflation. By doing that, they’re also risking recessions if they go too far.

“The economy doesn’t look to be softening if you look at employment data,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. That undercuts any investor hopes a weakening economy could persuade the Fed to take it easier on interest rates.

The selling was widespread Thursday, with more than 90% of stocks in the S&P 500 finishing in the red.

A stronger-than-expected report on the U.S. jobs market bolstered expectations for the Fed to keep raising rates and hold them at high levels for a while, potentially through 2023.

Fewer workers filed for unemployment benefits last week than economists expected. That’s good news for workers in general and an indication layoffs aren’t widespread despite worries about the economy. But it also keeps upward pressure on inflation, which gives the Fed more reason to keep rates high.