Wall Street recorded a mixed performance on Friday amid worries that strong jobs data would give the Federal Reserve a green light to keep going with its aggressive rate-hiking campaign. The lackluster performance continued the uncertain action stocks have seen all week, as investors contemplated whether to push ahead with a rebound that marked most of July.
The major U.S. equity indices managed to bounce back from an early slide, originally sparked by the release of stronger-than-expected jobs data. While the Dow turned its early dip into a modest gain by the close, the Nasdaq and S&P 500 finished solidly in the red.
The Dow Jones advanced 76.65 points to finish at 32,803.47. The S&P 500 dipped 6.75 points to end at 4,145.19, while Nasdaq retreated 63.03 points to close at 12,657.55.
Six of the 11 S&P sectors finished lower. This was led by a 1.7% slide in Consumer Discretionary. Meanwhile, Energy rebounded from recent weakness, climbing 2%. Financials showed modest strength as well.
Gains in stocks like JPMorgan, Chevron, Visa and Goldman Sachs allowed the Dow to outperforming the other major averages.
Stocks slumped at the outset of trading following the release of data showing the U.S. economy added substantially more jobs last month than economists had predicted. Investors bet that these figures would keep the door open for the Federal Reserve to continue its aggressive interest rate hikes. Shares bounced back in the middle of the day, but only the Dow managed to push into positive territory.
Looking to the bond market, the employment report prompted a spike in yields. The U.S. 10-year Treasury yield (US10Y) climbed 15 basis point at 2.83%, while the U.S. 2-year Treasury yield (US2Y) gained 20 basis points to 3.24%.
The spread between the 2-year and 10-year spent the day hovering around levels not seen in decades. The figure bounced around -41 basis points throughout the session, reaching the widest inversion since 2000.
Looking at the economic data, July nonfarm payrolls came in at +528k vs. the +250K expected and the +398K recorded for June (upwardly revised from 372K). Additionally, the July unemployment rate was 3.5% vs. 3.6% expected and June's 3.6% level.
Bank of America wrote in a note that “our indicators show that current labor market conditions remain well above prior expansion peaks, consistent with a historically tight labor market."
The firm added: "That said, [the jobs data] also show that labor market momentum has slowed sharply over the past year as the economy recovered from the pandemic. Labor market conditions tends to weaken when momentum is below average for an extended period of time.”