US stocks fell sharply on Friday, capitulating all that came from a post-jobs reports rally ahead of the Labor Day holiday weekend.
The S&P 500 fell 1.1%, while the Dow Jones Industrial Average fell by the same margin, or about 340 points. The tech-heavy Nasdaq posted the biggest slip of the major averages, limiting the session to a 1.3% drop.
The losses came after a rally earlier in the day showed some investors are optimistic that a more modest 0.50% rate hike could come from the Fed later this month following the monthly jobs report. 8 shows. job growth moderated last monthas expected.
Data from the Ministry of Labor Friday morning publication shows Nonfarm payrolls increased by 315,000 in August while the unemployment rate rose to 3.7%.
Economists had expected employment to rise to 298,000 with the unemployment rate expected to hold at 3.5%.
Wage growth was somewhat moderate last month, with average hourly earnings up 0.3% month-on-month and 5.2% year-over-year. Both readings were 0.1% lower than expected.
However, the biggest takeaway from Friday’s jobs data was the increase in participation, with 786,000 Americans entering the workforce last month and pushing the labor force participation rate to 62. .4%, the highest since March 2020.
Investors focused on data Friday after Fed Chairman Jerome Powell asserted in a hawkish speech at the Jackson Hole symposium last week that he willing to accept weaker working conditions in exchange for cooling prices.
“Slower wage growth in August, coupled with a major recovery in the workforce and more modest wage gains, is likely to favor a smaller 50bp rate hike from the Fed next month, instead for a 75bp increase, but Michael Pearce, senior US economist at Capital Economics, wrote in a note on Friday.
In addition to the equity market rally, the dollar weakened on Friday – a positive for risk assets – while Treasury yields are correcting after surging earlier in the week. this. The 10-year yield stood near 3.21% in late morning trading, down from a high of around 3.27% hit earlier in the week.
Shares of Lululemon (LULU) closed up 6.7% after the sportswear retailer reported quarterly earnings on Thursday that topping Wall Street estimates. The company also raised year-over-year profit and revenue guidance against analysts’ forecasts as affluent clients embraced the company’s new accessory offerings.
Broadcom (AVGO) shares also rose on Friday following the chipmaker’s strong sales outlook for the current quarter, quelling concerns about a slowdown in chip demand.
While some worryingly better financials this season have helped spark sentiment, many strategists have recently sounded the alarm about impending weakness in earnings.
According to Morgan Stanley’s Mike Wilson, while the first half of the year will be determined by Federal Reserve policy and tighter financial conditions, the second half will be determined by earnings expectations for next year.
“Therefore, equity investors should focus on this risk, not the Fed, especially as we head into the weakest seasonally of the year as earnings and inflation continue to eat up. into profit margins and demand,” Wilson said.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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