March 5, 2024

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Stocks fall after jobs report suggests more Fed rate hikes

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FILE - A Wall Street sign is shown in the Financial District, on Oct. 13, 2021, in the Manhattan borough of New York. Stocks are opening lower on Wall Street on Friday, June 3, 2022, putting indexes back into the red for the week. (AP Photo/John Minchillo, File)

NEW YORK (AP) — Stocks are falling on Wall Street Friday as investors consider the downside of the still-strong U.S. jobs market.

The S&P 500 was 0.9% lower in morning trading after a report showed employers hired more workers last month than economists expected.

While that’s a good sign for the economy amid worries about a possible recession, many investors saw it keeping the Federal Reserve on its path to hiking interest rates aggressively. Such moves would slow the economy in hopes of ultimately knocking down high inflation, and the Fed risks causing a recession if it moves too quickly or too far. In the meantime, higher interest rates put downward pressure on stocks and other investments.

The Dow Jones Industrial Average was down 133 points, or 0.4%, at 33,115, as of 10 a.m. Eastern time, and the Nasdaq composite was 1.3% lower. Bitcoin also fell, while a measure of worry in the stock market rose, even though some glass-half-full signals for inflationary pressures were buried within the jobs data.

It’s a reversal from Thursday’s market action, when a narrower report on the U.S. jobs market came in weaker than expected. That bolstered speculation that the Federal Reserve may consider a pause in raising rates later this year, and the hopes for a less-aggressive Fed sent stocks jumping.

Treasury yields climbed after initially wobbling following Friday’s report, which showed employers added 390,000 jobs last month versus expectations for 322,500. The yield on the two-year Treasury, which tends to move with expectations for Fed action, rose to 2.66% from 2.62% just before the report’s release.

The 10-year yield, which tracks expectations for longer-term growth and inflation, rose to 2.94% from 2.91% after earlier climbing as high as 2.99%.

The report did include some signals that analysts said could ultimately get the Fed to be less aggressive, and the mixed data could lead markets to swing through Friday. The S&P 500 bounced betwen losses of 0.8% and 1.4% in the first half hour of trading.

Average wages for workers were a touch weaker in May than economists expected. While that’s discouraging for people watching prices at the grocery store and gasoline pump jump much more than their paychecks, it could mean less future pressure on inflation across the economy. Plus, the nation’s job growth decelerated last month, even if it was better than expectations.

“The employment situation remains solid for the economy, but there are some signs of slowing,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “The signs aren’t clear and convincing enough to suggest the Fed needs to pause yet, but a lot can change over the next few months.”

More than four out of five stocks in the S&P 500 fell amid the worries about rising rates, with the heaviest losses hitting technology stocks and other big winners of the prior low-rate world.

Tesla fell 6.5% following a report that it’s considering layoffs amid concerns by its CEO, Elon Musk, about the economy. Because Tesla is the fifth-biggest company in the S&P 500, its movements carry a heavier weight on the index.

Wall Street’s benchmark index is heading for its eighth weekly loss in the last nine. The outlier in that stretch was last week, when stocks roared in part on speculation that the Fed would consider a pause in rate hikes in September.

European stock markets were little changed, with Germany’s DAX nearly unchanged and trading closed in London for a national holiday.

Markets were also closed in China for the Dragon Boat Festival, a national holiday. Benchmarks elsewhere in Asia pushed higher.

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