Stocks open lower as job growth remains strong

US stocks fell after the latest monthly jobs report, but they are still on track for weekly gains.

The S&P 500 fell 0.7% on Friday morning, a day after the benchmark index jumped 1.5% to post its fourth straight gain, its longest winning streak since March. The Dow Jones Industrial Average trimmed its slight gains and fell 0.4%. The technology-focused Nasdaq Composite lost 0.9%.

The June jobs report showed that higher interest rates and high inflation so far are not affecting employment, which remains strong. The US economy added 372,000 jobs in June, well above the 250,000 economists had expected in a Wall Street Journal survey.

Some analysts said the strong jobs report raised the chances that the Fed will increase 0.75 percentage points at its next meeting. The Fed raised interest rates by that much in June, the largest rate increase since 1994.

“It gives the Fed a little more confidence that it can move aggressively without seriously hurting the labor market,” said Mona Mahajan, chief investment analyst at Edward Jones.

However, Mrs. Historically, such steep hikes in interest rates ultimately affected the economy, Mahajan said.

“At some point they will hit the real economy,” she said.

Friday’s moves represent a sharp turnaround from the rest of the week. The US stock market rebounded this week on lighter-than-average trading volumes as weak economic numbers prompted investors to question how aggressively the Federal Reserve could raise interest rates to fight inflation down the road. Recently, data showed a decline in activity in industries ranging from manufacturing to home construction, accelerating fears among traders that the economy is heading for a recession.

This week, US central bankers reaffirmed their commitment to fighting inflation, first in the minutes of the Fed’s June meeting, and then again on Thursday when two Fed officials signaled their support for another rate hike of 0.75 percentage points later. from this month. Both also indicated that recession fears may be exaggerated.

“I think there has been relief that central banks, particularly the Federal Reserve, are going to deal with inflation,” said Susanna Streeter, senior investment and markets analyst at Hargreaves Lansdowne. “Inflation, and the pain it causes, which it could cause in the future if it continues to spiral out of control, is the greatest risk to the financial stability of economies.”

Amidst a string of record setbacks in the US, economists are watching for possible wave turn signals. Anna Hertenstein of the Wall Street Journal investigates how rising interest rates, high inflation, market sell-offs, and recession risks are challenging the growth of the American workforce. Photo: Olivier Doolery/AFP

Despite Friday’s losses, the major indicators are on track to end the week with gains. The S&P 500 is up 1.3% this week, while the Dow has added 0.5%. The tech-heavy Nasdaq climbed 3.3%.

Many expect the release of inflation data and the start of the second-quarter earnings season next week to lead to more volatility.

“Neither the bears nor the bulls seem to have any conviction at the moment,” said Viraj Patel, global macro strategist at Vanda Research.

Growth stocks and technology stocks fell, eroding some of the group’s gains this week. Throughout the week, investors grabbed shares of battered growth companies as they assessed the risks of a recession.

Twitter fell 4.1 percent after it said on Thursday it was laying off 30 percent of its talent acquisition team.

GameStop sank 9.1% after the retailer also said it would reduce its staff and fire its chief financial officer.

On Thursday, US stocks posted gains for the fourth consecutive session.


Pictures:

Michael Nagel/Bloomberg News

Fears of a recession on the horizon have dominated recently. The closely watched recession indicator, the yield curve, remained inverted on Friday, with the yield on two-year government bonds trading above its 10-year equivalent. The yield on the benchmark 10-year Treasury rose after the monthly jobs report to trade at 3.069%, up from 3.007% on Thursday.

The yield on the two-year government bond was 3.113%, up from 3.039% in the previous session. Yields fall when bond prices rise.

Elsewhere in the markets, Brent crude, the international benchmark for oil prices, rose. Earlier this week, oil prices fell on fears of a recession. Brent crude recently rose 0.3% to $104.88 a barrel.

The dollar rose, with the WSJ Dollar Index, which measures the US currency against a basket of 16 currencies, up 0.2%. The euro was down 0.2% to trade around $1.0147, putting the common currency close to parity, or equal to the value of the dollar.

Offshore, the Stoxx Europe 600 continental index was up 0.1%. In Asia, trading was mixed. Hong Kong’s Hang Seng Index is up 0.4%, while the Shanghai Composite Index is down 0.2%. In Japan, the Nikkei 225 closed 0.1% higher, trimming earlier gains after news that former Prime Minister Shinzo Abe was shot during a speech. the master. Abby later died.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Gunjan Banerji at gunjan.banerji@wsj.com

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