Stocks fell on Friday, after a busy week that saw the market rise and then crash in quick succession, as investors considered the implications of the latest update on the US labor market.
After dropping nearly 2 percent in early trading, the S&P 500 regained some ground and fell nearly half a percent. Cursor dropped 3.6 percent Thursday after recovery 3 percent On Wednesday, it is now flirting with its fifth consecutive weekly decline.
Wall Street’s concern this year has been the speed with which the Federal Reserve will withdraw its support for the economy, by raising interest rates and reducing its bond holdings. These moves make risky investments less attractive, ending years of low interest rates and policies aimed at maintaining cash flow through the financial system, both of which have helped fuel a massive rally in stocks.
On Friday, the Ministry of Labor reported that employers have added 428,000 jobs in AprilThe average hourly wage was 5.5% higher than last year. While the report showed employment remains resilient, economists said a strong labor market and accelerating wages are incentives for the central bank to raise interest rates more aggressively.
Of particular concern is that higher wages can lead to increased inflation, as companies pass on higher staffing costs to clients. This, in turn, can lead workers to demand higher wages, resulting in an upward spiral. Data released on Friday also showed that the workforce shrank unexpectedly in April, a phenomenon that could further tighten the labor market if it continues.
Federal Reserve on Wednesday Raising interest rates by half a percentage point, the largest increase since 2000. At a press conference that day, Jerome H. Powell, Chairman of the Federal Reserve, Record number of job opportunities As for the number of unemployed workers, that’s why policy makers have become more aggressive in recent months.
You can see that the job market is unbalanced; “You can see there is a shortage of labour,” Mr. Powell said. In April, he described the labor market as “Unsustainably hot. “
The report reinforced expectations that the Fed needs to stay on the path of raising interest rates quickly, said John Canavan, principal analyst at Oxford Economics. But trading on Friday was choppy, with stocks briefly climbing into positive territory as investors grappled with the Fed’s outlook.
“There was early pressure on the market this morning after payrolls grew more strongly than expected, which will keep the Fed on the pace of 50 basis point rate hikes for at least the next two meetings,” he said. “The employment report did nothing to change the outlook for the Fed from where it was before the release.”
In the bond market, the yield on 10-year Treasuries, a proxy for investors’ expectations about interest rates, rose to 3.07 percent, from today’s high.
As they have done all year, tech stocks outperformed the broader market on Friday. The Nasdaq Composite is down 0.7 percent, and is now down about 22 percent for the year so far — a much steeper decline than the S&P 500’s nearly 14 percent drop in that period.
Big tech companies reported mixed results at the start of the year in April, and are quickly losing their appeal among investors after two years of bullish performance. The decline this year came after the Nasdaq rose 81 percent at the end of 2021 from the end of 2018.
“When you look at big tech, it’s priced less than you expected the business to be forever perfect. This quarter is questioning that,” said David Bahnsen, chief investment officer at Bahnsen Group, a wealth management firm. And questions about the apparent perfection of their actions.
“Amateur organizer. Wannabe beer evangelist. General web fan. Certified internet ninja. Avid reader.”