Stocks were slumping Friday after July’s jobs report came in much stronger than expected.
Shortly after the open, the
Dow Jones Industrial Average
has fallen 144 points, or 0.4%, while the S&P 500 has fallen 0.7%, and the
has dropped 1.1%.
The U.S. added 528,000 jobs in July, more than doubling expectations for 258,000, while the unemployment rate fell to 3.5%, better than estimates for 3.6%.
“This is an awful number for the Fed and markets,” wrote NatAlliance Securities’ Andrew Brenner.
The concern now is that the Federal Reserve will increase its tightening of monetary policy, as a weakening in the labor market is needed to try and rein in red hot inflation. The market is now pricing in a 63.5% chance of a 75 basis point rate hike in September, up from 34% on Thursday, according to CME Group.
Jan Szilagyi, CEO and co-founder of AI research firm Toggle, wrote Friday that “for the Fed, this means maintaining a very hawkish stance, and can’t let go of the 75 basis-point pace – in fact, discussion about 100 basis-point will probably be reopened.”
The Fed has already raised rates four times this year, including two 75 basis-point rate increases in June and July—the biggest since 1994—and is expected to keep raising rates this year before cooling off in 2023. The risk is that denting economic demand, while it should bring inflation under control, could cause a recession.
But Friday’s job numbers could contradict the debate that the U.S. is in a recession, which has been ongoing since the U.S. economy shrank for the second straight quarter. Cliff Hodge, Chief Investment Officer at Cornerstone Wealth, argued against recession possibilities for now, and said Friday that “we don’t add 528k jobs in a month when we’re in a recession. That’s the good news.”
Hodge added that the bad news for markets is that “strength in the labor market and the broader economy will keep the Fed on a more aggressive hiking path, especially with wages being so hot.”
Now, the focus will pivot to next weeks consumer-price index, which will show how much inflation has either slowed down or picked up in July. Economists surveyed by FactSet expect that consumer prices increased 8.7% over the last 12 months, which is down from the 40-year record of 9.1% reported for June. If inflation ticked up more than expected, that could mean even more bad news for stocks.
Friday also marks the end of another heavy week of earnings. Some notable companies that report earnings include
(ticker: DKNG) and
Here are some stocks on the move Friday:
(NET) jumped 17% after the web security provider raised its full-year revenue guidance. The company detailed expected full-year revenue of $968 million to $972 million, above its previous projections of $955 million to $959 million and outpacing analysts’ consensus estimates of $958.4 million.
Holdings (SPCE) dropped 18% after the space tourism group pushed back the launch date of its commercial service to the second quarter of 2023, after already pushing the date back to the final quarter of 2022.
stock climbed 6.7% after the online sports betting platform lifted its financial forecast and reported a narrower loss and higher revenue than Wall Street expected for its second quarter.
(SQ) shed 5.7% even after the fintech company managed to beat Wall Street’s earnings estimates by 2 cents per share, notching net income on an adjusted basis of 18 cents per share in the second quarter. The bad news was that Bitcoin revenue from its Cash App unit dropped 34% in the quarter.