Stocks gave up an early rally and finished lower on Wall Street, marking their third consecutive losing week. The indices had opened higher following a labor market report that showed a moderate slowdown in hiring. This fueled cautious optimism that the Federal Reserve might not need to be so aggressive with high interest rates in its fight against inflation. Indexes fell in the afternoon after Russian energy giant Gazprom said it would not reopen a gas pipeline to Germany just yet, a bad sign for Europe’s continued struggle against rising energy prices. The S&P 500 fell about 1%.
THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.
Stocks fell on Wall Street on Friday afternoon, shedding all of their gains from an early rally that followed the release of the government’s latest labor market update.
The report, which shows employers slowed hiring in August, initially put traders in a buying mood, fueling cautious optimism that the Federal Reserve may not need to raise interest rates. interest so aggressively in its continued attempt to control inflation.
But the gains faded by mid-afternoon, leaving the S&P 500 down 1.1% at 3:32 p.m. EST. The benchmark was up 1.3% at the start.
The Dow Jones Industrial Average went from a gain of 370 points to a loss of 331 points. The blue chips index fell 1.1% to 31,312. The Nasdaq composite also tipped into the red, losing 1.4%. Small company stocks fell, dragging the Russell 2000 Index down 0.4%. The indices remain on pace to end lower for the week.
“Today’s jobs report was good, but obviously it wasn’t enough to sustain the rally,” said Ross Mayfield, investment strategist at Baird. “The bar to cross is ‘does this change the course of the Fed?’ And I don’t know if this report is enough to say yes.
In recent weeks, the market has wiped out much of the gains it made in July and early August as traders feared the Fed might unwind its interest rate hike anytime soon to lower the highest inflation in decades.
The latest jobs data seems to give traders hope that a key driver of inflation is cooling. On Friday, the Labor Department said the US economy added 315,000 jobs last month, up from 526,000 in July and below the average gain of the previous three months. The jobless rate also rose to 3.7% from 3.5% in July.
Average hourly earnings jumped 5.2% last month from a year earlier, but slowed slightly from July to August. This is a welcome sign in the fight against inflation, as companies generally pass the cost of higher wages onto their customers through higher prices.
The August jobs report suggests the Fed is making progress in its goal to rein in hiring and wage growth to help curb inflation. That could give the central bank reason to raise interest rates more moderately at its next policy meeting later this month — good news for Wall Street, which remains largely focused on rate expectations. .
“Today’s jobs report was a step in the right direction, as the pace of job and wage growth stabilized,” said Matt Peron, director of the research at Janus Henderson Investors. wood for now, as stubbornly high wage gains could keep the Fed on an aggressive course.
The Fed has already raised interest rates four times this year and is expected to raise short-term rates another 0.75 percentage points at its next meeting, according to CME Group. But following the latest jobs report, expectations for that three-quarters of a percentage point rise fell to 56% from 75% on Thursday.
Market watchers such as David Kelly, chief global strategist at JP Morgan Asset Management, said they still expect the central bank to raise rates later this month by 0.75 percentage points. additional.
Signs of some easing in the labor market as well as more welcome news on lower gasoline prices “increase the chances that the economy can gradually return to lower inflation over the next year without fall into a recession,” Kelly said.
Stocks slipped last week after Chairman Jerome Powell said the Fed needed to keep rates high enough “for a while” to slow the economy.
“The Fed won’t be swayed by one or two data, and it’s determined to bring inflation down,” Mayfield said. “They need a very large and long body of evidence before they can pivot, because the last thing they want is to stop too soon.”
The latest jobs data comes a day after the Department of Labor announced that jobless claims fell last week, another sign of a strong labor market. He said earlier this week that there were two jobs for every unemployed person in July.
Friday afternoon’s market reversal followed Russian energy giant Gazprom’s announcement that the shutdown of natural gas supplies via the Nord Stream 1 gas pipeline to Germany could be extended. The company cited the need for urgent maintenance work on the pipeline. On Wednesday Gazprom completely halted the flow of gas through the pipeline and said the shutdown would last three days.
Treasury yields, which rose alongside higher interest rate expectations, fell overall. The 10-year Treasury yield, which influences interest rates on mortgages and other loans, slipped to 3.20% from 3.26% on Thursday evening. The two-year Treasury yield, which tends to track expectations for Fed action, fell to 3.41% from 3.52%.
U.S. stock markets will be closed Monday for the Labor Day holiday.
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