U.S. Stocks Close Mostly Lower Following Monthly Jobs Report

wallstreet aug31 07jan22 lt

Stocks fluctuated over the course of the trading day on Friday but finished the session mostly lower. While the Dow ended the day little changed, the S&P 500 and the Nasdaq closed lower for the fourth consecutive session.

The major averages all closed in negative territory, with the tech-heavy Nasdaq showing a particularly steep drop. The Nasdaq tumbled 144.96 points or 1 percent to 14,935.90, while the S&P 500 fell 19.02 points or 0.4 percent to 4,677.03 and the Dow edged down 4.81 points or less than a tenth of a percent to 36,231.66.

For the first week of the New Year, the Nasdaq saw its worst week since February of 2021, plunging by 4.5 percent. The S&P 500 also slumped by 1.9 percent, while the narrower Dow dipped by 0.3 percent.

The continued pullback on Wall Street came following the release of the Labor Department's closely watched monthly jobs report.

While the report showed much weaker than expected job growth in the month of December, the unemployment rate still fell by more than expected.

The report said non-farm payroll employment rose by 199,000 jobs in December after climbing by an upwardly revised 249,000 jobs in November.

Economists had expected employment to jump by 400,000 jobs compared to the addition of 210,000 jobs originally reported for the previous month.

Despite the weaker than expected job growth, the unemployment rate slid to 3.9 percent in December from 4.2 percent in November. The unemployment rate was expected to edge down to 4.1 percent.

With the bigger than expected decrease, the unemployment rate fell to its lowest level since hitting 3.5 percent in February of 2020.

Economists have indicated the report is not likely to alter the Fed's plans to accelerate monetary policy normalization.

The minutes of the latest Fed meeting, released earlier this week, suggested the central bank could begin raising interest rates and shrinking its balance as soon as mid-March in an effort to combat elevated inflation.

"This latest jobs report will comfort the Fed into thinking its hawkish policy pivot is justified with the economy making progress toward maximum employment," said Gregory Daco, Chief U.S. Economist at Oxford Economics.

He added, "The Fed will continue signaling earlier and faster tightening of monetary policy to prevent inflation expectations from becoming unanchored and to ensure financial conditions gradually tighten."

Traders subsequently seem concerned the Fed will be raising rates at a time of slowing economic growth as a result of the Omicron variant of the coronavirus.

Sector News

Housing stocks moved sharply lower amid concerns about the impact of higher interest rates, resulting in a 3.3 percent nosedive by the Philadelphia Housing Sector Index.

Substantial weakness was also visible among semiconductor stocks, as reflected by the 2.9 percent plunge by the Philadelphia Semiconductor Index.

Networking and biotechnology stocks also saw considerable weakness, contributing to the steep drop by the tech-heavy Nasdaq.

On the other hand, airline stocks moved sharply higher on the day, driving the NYSE Arca Airline Index up by 2.9 percent.

Steel, banking and energy stocks also saw notable strength, with the continued advance by energy stocks coming despite a pullback by the price of crude oil.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. China's Shanghai Composite Index slipped by 0.2 percent, while Hong Kong's Hang Seng Index jumped by 1.8 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index rose by 0.5 percent, the French CAC 40 Index fell by 0.4 percent and the German DAX Index slid by 0.7 percent.

In the bond market, treasuries finished the session off their worst levels but still extended a recent sell-off. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.8 basis points to a nearly two-year closing high of 1.771 percent.

Looking Ahead

Next week's trading may be impacted by reaction to reports on consumer and producer price inflation, retail sales and industrial production as well as Fed Chair Jerome Powell's testimony before a Senate Banking Committee hearing on his renomination.

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