U.S. stock indices ended lower on Friday, abandoning strong opening gains and posting another week of losses, as investors reassessed a weaker-than-expected November jobs report as unlikely to stay in hand from a Federal Reserve which seems to want to control inflation.
How Do Stock Indices Trade?
The Dow Jones Industrial Average DJIA fell 59.71 points, or 0.2%, to close at 34,580.08, after hitting 34,801.31 near the open.
The S&P 500 SPX index,
slipped 38.67 points, or 0.8%, to end at 4,538.43, after establishing an intraday high of 4,608.03.
The Nasdaq COMP Composite Index,
lost 295.85 points, or 1.9%, to end at 15,085.47, near the 100-day moving average of 15,082.44, according to FactSet.
On Thursday, Dow Industrials rose 617.75 points, or 1.8%, to 34,639.79 – the best percentage gain since March 5, 2021 and the best points gain since November 9, 2020. The S&P 500 index closed up 1.4% at 4,577.10, its best day since October 14. The Nasdaq Composite added 0.8% to 15,381.32. The Russell 2000 index oriented small caps RUT,
gained 2.7% on Thursday to close at 2,206.33, a day after reaching its first correction since June 2020.
For the week, all three major indices posted losses, with the Dow Jones down 0.9%, the S&P 500 down 1.2% and the Nasdaq down 2.6%. This Dow recorded a fourth consecutive week of losses, while the S&P 500 and Nasdaq each closed with weekly declines for the second consecutive week.
The Russell 2000 Index saw a weekly decline of 3.9%.
What drove the markets?
Markets ended lower as a Labor Department report showed just 210,000 new jobs were created in the United States in November, well below estimates by economists polled by the Wall Street Journal for a gain of 573,000 new jobs. However, there were enough perceived positives in the numbers that it reignited concerns of an aggressive pace of tightening financial conditions by the Federal Reserve.
“I don’t think there was much in this report that was going to derail plans for a faster timeline” that the Federal Reserve appears to have to consider to slow its asset purchases, or the rate hikes “occurring. much earlier than investors expected just three months ago, “as the economy continues to recover during the pandemic, said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, in a telephone interview Friday.
While the main figure in the jobs report on Friday “wasn’t great,” some “favorable trends” in the data showed an increase in labor force participation, which the Fed likely sees as a “victory” as part of its maximum employment goal, according to Heppenstall. He said markets are expected to experience more volatility as the Fed moves away from accommodation priority in the economic recovery and focuses more on inflation.
Read: Jekyll-and-Hyde jobs in the US aren’t as ugly as they look
Remarks by Fed Chairman Jerome Powell on Tuesday regarding the potential acceleration of the central bank’s downsizing process amid high inflation, as well as the uncertainty surrounding the impact of the new omicron variant of the coronavirus, have been the main source of unease in the market this week.
âWe’ve had substantial volatility almost every day this week,â said Tom Mantione, managing director of UBS Private Wealth Management in Stamford, Connecticut, in a telephone interview on Friday. âYou are at an inflection point in Fed policy,â he said.
Friday’s lackluster jobs report figure came despite more aggressive measures by companies to hire people, and may highlight the challenges the job market faces in recovering from the pandemic, in especially as the spread of the omicron variant takes shape.
As for the positive aspects of the employment report, some 594,000 people re-entered the workforce in November, with the so-called participation rate reaching 61.8%. The unemployment rate fell to 4.2% from 4.6%, hitting a new pandemic low.
âWhile disappointing on the headlines, the rest of the report was much better and that may help explain why stocks are reversing,â wrote Michael Hewson, chief market analyst at CMC Markets UK, in a commentary. daily note.
Investors are scrutinizing the jobs report carefully because if the Fed sees it as positive, the central bank could accelerate interest rate hikes and strike a blow at rate-sensitive and growth-oriented stocks in the tech sector.
Read: Fed may have to end its bond-buying stimulus strategy in early spring, Bostic says
âThe markets have a lot to digest as the economy is strong, but the labor market is reaching its full potential and inflationary forces are already high, which is why the Fed feels more urgent to complete its cut early and may need to increase interest rates. faster than many people expect, âwrote Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance.
The market also fueled lingering concerns that tech valuations were too high, perhaps evidenced by the precipitous drop in shares of DocuSign DOCU, down 42.2% on Friday after the e-signature company’s billing and revenue forecast fell short of expectations and its chief executive said the pandemic boom had dissipated in the quarter.
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In other economic reports on Friday, the final November reading for the services sector-focused IHS Markit Purchasing Managers Index was 58 from an initial reading of 57. The more closely watched services reading of the Institute for Supply Management rose to 69.1 in November from 66.7, above forecast. A reading of 50 or better indicates improving conditions. Orders from US factories rose 1% in October.
In US politics, the passage by Congress Thursday night of a short-term extension of government funding, until Feb. 18, avoids a partial shutdown after resolving a deadlock on vaccine rules. President Joe Biden enacted the bill on Friday to keep the federal government running.
Which companies were the center of attention?
U.S.-listed shares of Chinese companies fell to the fore on Friday, after Chinese rideshare giant Have I got Global DIDI announced Thursday evening that it would withdraw from the New York Stock Exchange, following pressure from the Chinese government. Didi shares plunged 22.2% on Friday.
Actions of Marvell technology
shares jumped 17.7% after the chipmaker’s earnings and outlook beat Wall Street expectations.
How did the other assets trade?
The yield on the 10-year BX: TMUBMUSD10Y Treasury bill fell more than 10 basis points to 1.342% on Friday. The yield fell 14.2 basis points this week for its biggest weekly decline since June 2020, according to Dow Jones Market Data. The prices of treasury bills fall as yields rise.
The ICE US Dollar Index DXY, a measure of the currency against half a dozen other currency units, has changed little.
In oil futures, West Texas Intermediate CL00 crude for January delivery CLF22,
fell 0.4% on Friday to $ 66.26 a barrel, posting a sixth straight week of decline.
GC00 gold futures,
for the February delivery GCF22,
rose 1.2% to $ 1,783.90 an ounce. For the week, gold prices based on the most active contract traded down nearly 0.1%, according to Dow Jones Market Data.
The Stoxx Europe 600 SXXP index,
closed 0.6% lower on Friday for a weekly decline of 0.3%. London’s FTSE 100 UKX index,
slipped 0.1% but remained up 1.1% for the week.
In Asia, the Shanghai Composite Index SHCOMP,
closed 0.9% higher on Friday for a weekly gain of 1.2%, while the Hang Seng HSI Index,
closed 0.1% lower in Hong Kong, bringing its decline for the week to 1.3%. The Japanese Nikkei 225 NIK index,
closed 1% higher on Friday but still slipped 2.5% for the week.
âBarbara Kollmeyer contributed to this article.