Employers added 263,000 jobs last month. That’s a slowdown from the 315,000 hiring pace in July, but still more than the 250,000 economists had expected.
Also discouraging investors was the partial improvement in the unemployment rate for the wrong reasons. Among the unemployed, fewer than ever are actively looking for work. This is a continuation of a long-term trend that could keep upward pressure on wages and inflation.
“We’re not out of the woods yet, but we should be getting closer as the effects of aggressive policy begin to show,” said Matt Peron, director of research at Janus Henderson Investors.
The Fed hopes to slow the economy and job market by raising interest rates. The plan is to stop the inflation of purchases needed to push prices higher. The Fed has already seen some of the effects, with higher mortgage rates hurting the housing industry in particular. The risk is that if the Fed goes too far, it could push the economy into recession. Meanwhile, higher rates drive down the prices of stocks, cryptocurrencies and other investments.
“It’s all about inflation at the moment,” said Peter Essele, head of portfolio management at Commonwealth Financial Network. “We think it will moderate over the next few quarters.”
Overall, many investors see Friday’s jobs data as keeping the Fed on track to raise its overnight interest rate by three quarters of a percentage point next month. It would be the fourth such increase, more than three times the usual amount, and would bring the rate to a range of 3.75-4 percent. The year started almost from scratch.
Crude oil posted its biggest weekly gain since March. Benchmark US crude oil rose 4.7 percent to $92.64 a barrel on Friday. Brent oil, the international standard, increased by 3.7 percent to $97.92.
Major oil producers rose higher as they pledged to cut production to keep prices down. This should keep pressure on inflation, which is still at a four-decade high but is hopefully moderating.
Rising crude oil prices helped oil-related stocks be among the few that rose on Wall Street on Friday. Oilfield services provider Halliburton rose 2 percent.
Shares of technology companies went in the opposite direction. They have been among the hardest hit by this year’s rising rates, which hit investments that are riskiest, most expensive or make investors wait the longest for a big raise.
Microsoft fell 5.1 percent, and Amazon fell 4.8 percent.
More than 90 percent of S&P 500 stocks closed lower on Friday. The index decreased by 104.86 points to 3,639.66. It ended the week up 1.5 percent, its first weekly gain in four weeks.
The Dow index fell 630.15 points to 29,296.79 points, and the Nasdaq lost 420.91 points to 10,652.40 points.
Small company stocks also gave way more. The Russell 2000 index fell 50.36 points, or 2.9 percent, to 1,702.15.
Apart from higher interest rates, analysts say the next hammer to hit stocks could be a potential decline in corporate profits. As the economy slows, companies struggle with high inflation and interest rates.
Advanced Micro Devices fell 13.9 percent to between $6.5 billion and $6.9 billion, down 13.9 percent, after warning that revenue for the latest quarter would be $US5.6 billion ($7.6 billion). AMD said the PC market weakened significantly during the quarter, hurting its sales.
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Levi Strauss fell 11.7 percent after it cut its financial forecast for the fiscal year. He cited the rising value of the US dollar against other currencies, which weakens the dollar value of overseas sales, as well as a more cautious outlook for economies in North America and Europe.
Treasury yields rose immediately after the jobs report was released, though they faltered a bit later. The yield on the 10-year Treasury, which helps set interest rates for mortgages and other loans, rose to 3.88 percent from 3.83 percent late Thursday.
The two-year yield rose to 4.30 percent from 4.26 percent, tracking more closely expectations for Fed action. By early morning, it had climbed above 4.33 percent, nearing its highest level since 2007.
AP
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