Nasdaq, S&P, Dow set to end lower as market continues to grapple with hot jobs report
U.S. stocks on Monday were on track to extend their decline to a second straight session as sentiment was weighed down by concerns that Friday's explosive jobs report could cause the Federal Reserve to keep its monetary policy tight.
Into the final hour of trading, the tech-heavy Nasdaq Composite (COMP.IND) was down 1.18% to 11,864.71 points. The benchmark S&P 500 (SP500) fell 0.78% to 4,104.28 points, while the blue-chip Dow (DJI) declined 0.28% to 33,830.45 points.
All 11 S&P sectors - with the exception of Utilities - were trading in the red, led by Technology and Communication Services.
Treasury yields advanced. The 10-year U.S. Treasury yield (US10Y) rose 10 basis points to 3.63%, while the 2-year yield (US2Y) rose 15 basis points to 4.45%. Meanwhile, exchange traded funds exposed to the Treasury market fell.
All three major averages on Friday had slipped following the release of data that showed the U.S. economy added 517K jobs in January, much higher than the anticipated figure. Moreover, the report showed a drop in the jobless rate to a 53-year low.
The numbers continued to point to a highly resilient labor market and potentially throws a wrench into the Fed's plans to dial back on rate hikes.
"The data has become less reliable post-pandemic, but signals companies are unwilling to lose staff," UBS's Paul Donovan said. "Labor hoarding and lower churn in the labor market creates a payrolls surge (although this was not matched in the equivalent household survey data). The message is a strong report, but not quite as strong as the headlines suggested."
Despite Friday's retreat, the benchmark S&P 500 (SP500) eked out an overall gain for last week after markets were buoyed following Fed chair Jerome Powell's acknowledgement that a "disinflationary" process had begun, though he cautioned that the central bank still had more work to do and signaled further hikes ahead.
The economic calendar was light on Monday, and will remain such for most of this week, with focus on a host of Fed speakers scheduled to talk.
"Given the blockbuster payrolls print, Fed Chair Powell's speech at the Economic Club of Washington tomorrow could be the highlight," Deutsche Bank's Jim Reid said.
"The release valve post the blackout period will mean we have a mini deluge of other Fed speakers too including Vice Chair of Supervision Barr (tomorrow), New York Fed President Williams, Fed Governor Cook, Minneapolis President Kashkari and Fed Governor Waller (all Wednesday). Their comments on the payroll report will be devoured and it'll be interesting if they, and especially Powell, decide to slightly firm up the hawkish spin and be more explicit on a terminal rate above 5%," Reid added.
Among active stocks, Catalent (CTLT) surged and was the top percentage gainer on the S&P 500 (SP500) after Jefferies estimated a $93/share offer price for the company under a potential merger deal with Danaher (DHR).
Shares of Newmont (NEM) fell after it offered to buy Australia's top gold miner Newcrest Mining.
In earnings related news, Tyson Foods (TSN) was lower after reporting disappointing results. Market participants will be looking ahead to results from companies such as videogame publishers Activision Blizzard (ATVI) and Take-Two (TTWO) after the closing bell.