Bad week for tech, mixed data on jobs send US markets lower
Stocks closed lower and Treasury yields rose Friday with much of Wall Street anticipating that the Federal Reserve will raise interest rates as soon as March despite a mixed report on the U.S. jobs market.
The downbeat finish capped the worst week for the S&P 500 technology sector since October 2020 and the biggest weekly drop for the tech-heavy Nasdaq in nearly a year.
The S&P 500 fell 0.4%, and the yield on the 10-year Treasury hit its highest level since COVID-19 began pummeling markets at the start of 2020. The benchmark index had been up 0.3% in the early going and then fell as much as 0.7% following the mixed reading from the U.S. Labor Department, which is usually the most anticipated piece of economic data every month.
Employers added only about half the number of jobs last month that economists expected, a seeming negative for the economy. But average wages rose more for workers than expected. On the whole, many investors saw it as evidence that the jobs market is strong enough for the Federal Reserve to continue leaning toward raising interest rates more quickly off their record lows.
“Does this bring the Fed to the table in March or in June?” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “It’s a moot point, in the long run. They’re going to raise rates in 2022.”
Higher rates could help corral the high inflation sweeping the world, but they would also mark an end to the conditions that have put financial markets in “easy mode” for many investors since early 2020. Higher rates also make shares in high-flying tech companies and other expensive growth stocks less attractive, which is why the S&P 500 tech sector bore the brunt of the sell-off this week as bond yields rose.
Immediately after the report’s release, Treasury yields continued the sharp climbs they’ve been on this week as expectations have built for the Fed to raise rates more quickly. The yield on the 10-year Treasury hit 1.77%, up from 1.73% late Thursday. That’s its highest closing point since the middle of January 2020, according to Tradeweb.
Friday’s pullback marked the S&P 500’s fourth straight drop. It ended down 19.02 points to 4,677.03, or about 2.5% below the all-time high it set Monday.
The Dow Jones Industrial Average slipped 4.81 points, or less than 0.1%, at 36,231.66, after earlier flipping between a gain of 146 points and a loss of 124. The Nasdaq composite fell 144.96 points, or 1%, to 14,935.90. The major indexes all posted a weekly loss, though the Nasdaq’s weekly slide was its biggest since late February.
The Russell 2000 index fell 26.56 points, or 1.2%, to 2,179.81.
Tesla fell 3.5%, and Nvidia slid 3.3%. Both were among the heaviest weights on the S&P 500.
Gold for February delivery rose $8.20 to $1,797.40 an ounce. Silver for March delivery rose 22 cents to $22.41 an ounce, and March copper rose 6 cents to $4.41 a pound.
The dollar fell to 115.56 Japanese yen from 115.96 yen. The euro rose to $1.1362 from $1.1288.