U.S. stocks lost ground after the monthly jobs report beat expectations, heading toward strong weekly gains.
The S&P 500 was down 0.3% in recent trading, a day after the benchmark index jumped 1.5% to log a fourth consecutive gain, its longest winning streak since March. The Dow Jones Industrial Average dropped 0.1%. The tech-focused Nasdaq Composite lost 0.5%.
The June jobs report showed that rising interest rates and high inflation are so far not affecting hiring, which remains strong. The U.S. economy added 372,000 jobs in June, well above the 250,000 expected by economists surveyed by The Wall Street Journal.
Some analysts said that the strong jobs report increased chances that the Fed would proceed with a 0.75-percentage-point increase at its next meeting. The Fed in June raised interest rates by that much, marking its largest interest-rate increase since 1994.
“It gives the Fed a little bit more confidence that it can move aggressively without severely hurting the labor market,” said
Mona Mahajan,
senior investment strategist at Edward Jones.
However, Ms. Mahajan said that historically, such aggressive interest-rate hikes eventually dent the economy.
“At some point they will hit the real economy,” she said.
For the most part, investors have lately gotten a respite from the heavy selling across markets that has dominated for much of the year. The S&P 500 has risen 1.7% this week, while the Dow has added about 0.8%. The tech-heavy Nasdaq has jumped 3.9%.
Throughout the week, many investors returned to a familiar trade: Buying shares of tech companies. The S&P 500’s technology and communication services groups have been among the biggest winners. The
ARK Innovation ETF
has soared almost 16% this week.
Some weak economic figures in recent weeks have led investors to question how aggressively the Fed will raise interest rates to fight inflation down the road. Lately, data have shown a drop in activity in industries ranging from manufacturing to home construction, accelerating worries among traders that the economy is headed for a recession.
Of course, the latest jobs figures show that the labor market remains strong, providing solace to some investors that fears of a recession may be overblown and yet another conflicting signal about the path of the economy.
This week, U.S. central bankers reaffirmed their commitment to fighting inflation, first in minutes from the Fed’s June meeting, and then again on Thursday when two Fed officials signaled support for another 0.75-percentage-point interest-rate increase later this month. Both also indicated that recession fears may be overblown.
“I think there has been this relief that central banks, particularly the Federal Reserve, will get a handle on inflation,” said
Susannah Streeter,
senior investment and markets analyst at Hargreaves Lansdown.
In corporate news,
fell 3.9% after it said Thursday it would lay off 30% of its talent-acquisition team.
GameStop
sank 3.4% after the retailer also said it was cutting staff and terminated its finance chief.
U.S. stocks on Thursday posted their fourth consecutive session of gains.
Photo:
Michael Nagle/Bloomberg News
Still, many expect the release of inflation data and the start of second-quarter earnings season next week to bring more choppiness.
Fears of a recession on the horizon have rippled through stock, bond and metals markets lately. Economists surveyed by The Wall Street Journal have dramatically raised the probability of a recession recently and the prospect of one has sent copper prices sharply lower while spurring a rare inversion in the bond market.
A closely watched recession predictor, the yield curve, remained inverted Friday, with the yield on two-year government bonds trading higher than the 10-year equivalent. The yield on the benchmark 10-year Treasury note rose after the monthly jobs report to trade at 3.095%, up from 3.007% Thursday.
The yield on two-year government bonds traded at 3.113%, up from 3.039% in the previous session. Yields fall when bond prices rise.
Elsewhere in markets, Brent crude, the international benchmark for oil prices, ticked up. Earlier this week, oil prices plunged. Brent most recently gained 0.3% to $104.88 a barrel.
The dollar climbed, with The WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, up 0.2%. The euro fell 0.2% to trade around $1.0147, putting the common currency within striking distance of parity, or equal value with the dollar.
Overseas, the pan-continental Stoxx Europe 600 edged up 0.5%, finishing the week up 2.5%. In Asia, trading was mixed. Hong Kong’s Hang Seng rose 0.4%, while the Shanghai Composite fell 0.2%. In Japan, the Nikkei 225 finished up 0.1%, paring earlier gains following news that former Prime Minister
Shinzo Abe
was shot during a speech. Mr. Abe later died.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Gunjan Banerji at gunjan.banerji@wsj.com
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