World News | Stock Market Today: Wall Street Sinks on Worries That a Too-hot Job Market Will Keep Inflation High
Get latest articles and stories on World at LatestLY. Worries about a too-hot job market are sending Wall Street lower Friday, and stocks are on track to close out a fifth straight losing week with more drops.
New York, Oct 6 (AP) Worries about a too-hot job market are sending Wall Street lower Friday, and stocks are on track to close out a fifth straight losing week with more drops.
The S and P 500 was 0.8 per cent lower in early trading and heading for its longest weekly losing streak in 16 months.
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The Dow Jones Industrial Average was down 196 points, or 0.6 per cent, as of 9.40 am Eastern time, and the Nasdaq composite was 0.8 per cent lower.
Once again, it was rising yields in the bond market pushing stocks lower. Yields leaped after a report said US employers added nearly twice as many jobs last month as economists expected.
Such strength for hiring is normally a good sign for financial markets because it means the economy is doing well and corporate profits can too.
But in this new normal of high inflation, the worry on Wall Street is too much strength in the job market will end up pushing companies to keep raising prices for their products.
That upward pressure on inflation could in turn force the Federal Reserve to keep interest rates high for a longer time than expected.
Wall Street hates high interest rates because they knock down prices for all kinds of investments.
And even though the job market has been powering through the Fed's pulling its main interest rate to the highest level since 2001, high rates work to extinguish high inflation by slowing the entire economy.
That raises the risk of a recession later on.
Trading could be shaky through the day, though, as Friday's jobs report also included some more encouraging nuggets for the inflation fighters at the Federal Reserve.
“The blow-out jobs report is maybe not so good news for markets,” said Seema Shah, chief global strategist at Principal Asset Management.
“Markets want the perfect landing,” she said about the possibility of an economy that's slowing just enough to undercut high inflation but not so much that it causes a painful recession, “and instead they are facing an upward sloping path.”
Treasury yields soared following the jobs report. The yield on the 10-year Treasury jumped to 4.85 per cent from 4.72 per cent late Thursday and again is near its highest level since 2007.
Shorter-term yields were swinging, though, as economists pointed to some more encouraging data within the jobs report.
The two-year Treasury yield more closely tracks expectations for action by the Fed than the 10-year yield, for example, and it quickly soared from 5.04 per cent just before the release of the jobs report to 5.20 per cent shortly afterward. It then pared its gain to pull back to 5.07 per cent.
Among the potentially encouraging signals for the Fed: Workers' average wages rose at a slower rate in September than economists expected.
While that's discouraging for workers trying to keep up with inflation, it could remove some inclination by companies to raise their prices.
The Fed should be focusing on such moderate wage gains, rather than the growth in jobs, said Brian Jacobsen, chief economist at Annex Wealth Management.
“The labor market isn't overheating, it's still healing,” he said.
Average hourly earnings rose at the slowest rate, on a year-over-year basis, since June 2021.
“Like most reports, Fed will find things to like and dislike here,” according to Andrew Patterson, senior economist at Vanguard.
That raises the stakes for upcoming reports next week on inflation at both the consumer and wholesale levels. They're the next huge data points coming before the Fed's next meeting on interest rates, which ends November 1.
High interest rates tend to hit technology and other high-growth stocks particularly hard, and Big Tech was helping to lead the market lower.
A 2.9 per cent drop for Tesla and 1 per cent fall for Amazon were two of the heaviest weights on the S and P 500.
Stocks of oil-and-gas producers were also sinking, including a 2.2 per cent drop for Chevron.
They've been dropping as prices for crude oil have pulled back sharply over the last week. A barrel of benchmark US crude slipped 0.2 per cent to USD 82.18, while Brent crude, the international standard, added 0.5 per cent to USD 84.51.
The come down for oil prices from above USD 93 per barrel last week has helped to offer some relief on the inflation front, after crude had charged higher from USD 70 in the summer.
In stock markets abroad, indexes were mostly higher across much of Europe and Asia. Japan's Nikkei 225 was an outlier and slipped 0.3 per cent. (AP)
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)