Damien J. Troyes, The Associated Press
4 minutes ago
FILE – Trader Michael Milano, center, works with a colleague on the floor of the New York Stock Exchange, May 30, 2024. It was a steady day on Wall Street, Friday, June 7, 2024, but global stock markets were mixed as markets anticipated the release of key U.S. jobs data later that day. (AP Photo/Richard Drew, File)
NEW YORK (AP) — Stocks fell and Treasury yields surged Friday after the government released its jobs report, with the key figure beating expectations.
Overall, the report suggests that markets may have to wait longer for interest rate cuts from the Federal Reserve.
The S&P 500 fell 5.97 points, or 0.1%, to 5,346.99. The lackluster close capped an otherwise strong week for the benchmark index, which included a record high. The index was up 1.3% for the week.
The Nasdaq Composite Index fell 39.99 points, or 0.2%, to 38,798.99, a modest result following a week in which it rose 2.4% to a record high.
The Dow Jones Industrial Average fell 87.18 points, or 0.2 percent, to 38,798.99.
Smaller companies fared even worse: The Russell 2000 fell 1.1%.
U.S. employers added 272,000 jobs in May, an increase from April and more than economists expected. The report also showed the unemployment rate rose for a second consecutive month. Overall, the job market remains strong but is showing some signs of weakening. The strength of the job market has supported consumer spending and the overall economy, but it complicates the direction of the Federal Reserve’s future interest rate policy.
The yield on the 10-year Treasury note jumped to 4.43% from 4.29% just before the jobs report was released. The yield on the 2-year note, which more accurately reflects the Fed’s expectations, jumped to 4.89% from 4.74% just before the jobs report was released.
Wall Street expects at least one cut in the Fed’s benchmark interest rate by the end of the year. The central bank has raised interest rates to their highest level in more than two decades in an attempt to keep inflation at its 2% target. But inflation has remained stubbornly around 3% after falling sharply over the past two years. A strong economy could keep prices rising at a faster clip.
“For those concerned about inflation, particularly the Federal Reserve, this report should raise concerns that wage pressures and inflation stickiness are not temporary and are likely here to stay,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
A slowdown in the economy could drive down inflation and prompt the Fed to cut interest rates, which traders crave. The danger is that the slowdown could go too far and tip into a recession, ultimately hurting stocks.
Economic data earlier this week hinted at a possible economic slowdown. The latest reports showed that manufacturing contracted in May, worker productivity wasn’t as strong as economists thought, and job openings were falling. These signs of weakness, combined with a big rally in semiconductor companies focused on artificial intelligence technology, helped the market hit new record highs throughout the week.
Wholesale and consumer price updates due next week will be closely watched by investors and the Fed alike for a clearer picture of the path of inflation.
Fed officials are expected to keep interest rates steady when they meet next week. After the jobs report was released, investors further backed away from expectations that the Fed would cut rates at its July meeting, according to CME Group data.
Wall Street is also watching retailer earnings as customers cut back on non-essential goods. Consumer spending is a major driver of the economy, but persistent inflation is hurting consumers, especially lower-income earners.
GameStop, the struggling video game retailer at the center of the meme-stock boom, saw its shares fall 39.4% after it reported another quarterly loss and announced plans to sell up to 75 million more shares.
