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U.S. stock markets closed sharply lower on Friday following stronger-than-expected job data for September. Market participants were worried that a solid labor market will enable the Fed to continue its rigorous interest rate hike policy. All the three major stock indexes ended in negative territory. However, for the week, these indexes finished in green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 2.1% or 630.15 points to close at 29,296.79. Notably, 29 components of the 30-stock index ended in negative territory while 1 in green. The sole gainer of the blue-chip index was Merck & Co. Inc. (MRK - Free Report) , shares of which rose 0.2%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq Composite finished at 10,652.40, sliding 3.8% or 420.91 points due to disappointing performance of large-cap technology stocks.
The S&P 500 dropped 2.8% or 104.86 points to end at 3,639.66. All 11 broad sectors of the benchmark index closed in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC), the Materials Select Sector SPDR (XLB) and the Technology Select Sector SPDR (XLK) plunged 3.4%, 2.7%, 2.5% and 4.1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 2.8% to 31.36. A total of 11.15 billion shares were traded on Friday, lower than the last 20-session average of 11.73 billion. Decliners outnumbered advancers on the NYSE by a 5.78-to-1 ratio. On Nasdaq, a 4.56-to-1 ratio favored declining issues.
Strong Job Data for September
The Department of Labor reported that the U.S. economy added 263,000 jobs in September, marginally below the consensus estimate of 266,000. Moreover, September’s job additions were significantly lower than 315,000 jobs added in August and marked the lowest monthly payroll since April 2021.
The unemployment rate fell to 3.5% in September from 3.7% in August. The consensus estimate was 3.7%. However, the real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) dropped to 6.7% in September from 7% in the previous month.
The labor force participation rate edged down to 62.3% in September as the size of the labor force decreased by 57,000. The average workweek remained flat month over month at 34.5 in September. The average hourly wage rate remained flat month over month at 0.3% in September. The consensus estimate was 0.4%. Year over year, average hourly earnings increased 5% in line with the consensus estimate.
Wall Street Tumbles on Solid Labor Market
Market participants were worried that the Fed will purse it ultra-hawkish monetary policies buoyed by a robust labor market. In its September FOMC meeting, the Fed has raised the median of the Fed Fund rate for 2022 to 4.4% in September from 3.4% in June.
This means, the range of the benchmark lending rate at the end of 2022 will be 4.25-4.5%, indicating 75 basis-point and 50 basis-point interest rate hike in November and December, respectively. Further, the central bank has projected that the median of the benchmark interest rate will reach 4.6% in 2023. This means another 50 basis-point rate hike throughout 2023. The first rate cut is not expected before 2024 as the Fed is expecting inflation to come down to its target rate of 2% in 2025.
Following the September job report, the yield on the benchmark 10-Year U.S. Treasury Note climbed to 3.888%. The yield on the short-term 2-Year U.S. Treasury Note jumped to 4.312%. This yield is most sensitive to the Fed’s higher interest rate regime. The yield on the long-term 30-Year U.S. Treasury Note closed at 3.848%.
The ICE Dollar index is currently hovering around its 20-year high level. Economists and financial researchers are concerned that a rising dollar will hurt the sales of U.S. multinational companies as their products will be more expensive in the international markets. Further, the volume of international trade is likely to be impacted as most of these trades are settled in U.S. dollar terms.
Weekly Roundup
Despite the grim situation, last week as a good one for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – have gained 2%, 1.5% and 0.7%, respectively. This marked the best weekly performance of these indexes since the week ended Sep 9. Massive gains in the first two trading days of October due to investors’ expectation of a Fed pivot enabled Wall Street to finished the week in green.
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Stock Market News for Oct 10, 2022
U.S. stock markets closed sharply lower on Friday following stronger-than-expected job data for September. Market participants were worried that a solid labor market will enable the Fed to continue its rigorous interest rate hike policy. All the three major stock indexes ended in negative territory. However, for the week, these indexes finished in green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 2.1% or 630.15 points to close at 29,296.79. Notably, 29 components of the 30-stock index ended in negative territory while 1 in green. The sole gainer of the blue-chip index was Merck & Co. Inc. (MRK - Free Report) , shares of which rose 0.2%. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The tech-heavy Nasdaq Composite finished at 10,652.40, sliding 3.8% or 420.91 points due to disappointing performance of large-cap technology stocks.
The S&P 500 dropped 2.8% or 104.86 points to end at 3,639.66. All 11 broad sectors of the benchmark index closed in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC), the Materials Select Sector SPDR (XLB) and the Technology Select Sector SPDR (XLK) plunged 3.4%, 2.7%, 2.5% and 4.1%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 2.8% to 31.36. A total of 11.15 billion shares were traded on Friday, lower than the last 20-session average of 11.73 billion. Decliners outnumbered advancers on the NYSE by a 5.78-to-1 ratio. On Nasdaq, a 4.56-to-1 ratio favored declining issues.
Strong Job Data for September
The Department of Labor reported that the U.S. economy added 263,000 jobs in September, marginally below the consensus estimate of 266,000. Moreover, September’s job additions were significantly lower than 315,000 jobs added in August and marked the lowest monthly payroll since April 2021.
The unemployment rate fell to 3.5% in September from 3.7% in August. The consensus estimate was 3.7%. However, the real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) dropped to 6.7% in September from 7% in the previous month.
The labor force participation rate edged down to 62.3% in September as the size of the labor force decreased by 57,000. The average workweek remained flat month over month at 34.5 in September. The average hourly wage rate remained flat month over month at 0.3% in September. The consensus estimate was 0.4%. Year over year, average hourly earnings increased 5% in line with the consensus estimate.
Wall Street Tumbles on Solid Labor Market
Market participants were worried that the Fed will purse it ultra-hawkish monetary policies buoyed by a robust labor market. In its September FOMC meeting, the Fed has raised the median of the Fed Fund rate for 2022 to 4.4% in September from 3.4% in June.
This means, the range of the benchmark lending rate at the end of 2022 will be 4.25-4.5%, indicating 75 basis-point and 50 basis-point interest rate hike in November and December, respectively. Further, the central bank has projected that the median of the benchmark interest rate will reach 4.6% in 2023. This means another 50 basis-point rate hike throughout 2023. The first rate cut is not expected before 2024 as the Fed is expecting inflation to come down to its target rate of 2% in 2025.
Following the September job report, the yield on the benchmark 10-Year U.S. Treasury Note climbed to 3.888%. The yield on the short-term 2-Year U.S. Treasury Note jumped to 4.312%. This yield is most sensitive to the Fed’s higher interest rate regime. The yield on the long-term 30-Year U.S. Treasury Note closed at 3.848%.
The ICE Dollar index is currently hovering around its 20-year high level. Economists and financial researchers are concerned that a rising dollar will hurt the sales of U.S. multinational companies as their products will be more expensive in the international markets. Further, the volume of international trade is likely to be impacted as most of these trades are settled in U.S. dollar terms.
Weekly Roundup
Despite the grim situation, last week as a good one for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – have gained 2%, 1.5% and 0.7%, respectively. This marked the best weekly performance of these indexes since the week ended Sep 9. Massive gains in the first two trading days of October due to investors’ expectation of a Fed pivot enabled Wall Street to finished the week in green.