Stocks suffer third losing week in row

Slower hiring hints at cooling, but investors remain cautious

Stocks gave up an early rally and closed lower Friday, marking their third losing week in a row and extending Wall Street’s late-summer slump.

Major stock indexes climbed broadly after the government’s latest job market report, which showed employers slowed their hiring in August. The report put traders in a buying mood, stoking optimism that the Federal Reserve may not need to raise interest rates as aggressively in its bid to tame inflation.

But the market reversed course by midafternoon, shedding all of its gains. That left the S&P 500 and Dow Jones Industrial Average

1.1 percent lower. The Nasdaq composite fell 1.3 percent.

“The jobs report today was nice, but it was not enough to obviously sustain the rally,” said Ross Mayfield, investment strategist at Baird. “The bar to clear is ‘does this change the trajectory of the Fed?’ And I don’t know that this report is enough to say yes.”

In recent weeks, the market has wiped out much of the gains it made in July and early August as traders worried that the Fed would not let up anytime soon on raising interest rates to bring down the highest inflation in decades.

The latest jobs data appeared to give traders some hope that a key driver of inflation is cooling. On Friday, the Labor Department reported that the U.S. economy added 315,000 jobs last month, down from 526,000 in July and below the average gain of the previous three months. The unemployment rate rose to 3.7 percent from 3.5 percent in July.

Average hourly pay jumped 5.2 percent last month from a year earlier but slowed slightly from July to August. That is a welcome sign in the inflation fight, as businesses pass the cost of higher wages on to their customers through higher prices.

“Today’s jobs report was a step in the right direction, in that the pace of job and wage growth stabilized,” said Matt Peron, director of Research at Janus Henderson Investors. “However, we reiterate our caution that we are not out of the woods just yet, as stubbornly high wage gains could keep the Fed on an aggressive path.”

The Fed has raised interest rates four times this year and is expected to raise short-term rates by another 0.75 percentage points at its next meeting this month.

Treasury yields, which have been rising with expectations for higher interest rates, fell. The yield on the 10-year Treasury slipped to 3.20 percent from 3.26 percent Thursday.