U.S. stocks fell sharply Friday, cutting into weekly gains, after September jobs data showed an unexpected fall in the unemployment rate that’s expected to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.
Investors were also weighing a profit warning at a leading microchip maker.
What’s happening
-
The Dow Jones Industrial Average
DJIA,
-1.51%
fell 514 points, or 1.7%, to 29,413. -
The S&P 500
SPX,
-2.04%
dropped 83 points, or 2.2%, to 3,662. -
The Nasdaq Composite
COMP,
-2.84%
shed 315 points, or 2.8%, to 10,758.
Stocks were on track for back-to-back losses, trimming weekly gains.
What’s driving markets
The Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.
“The September payroll report, while close to consensus, was still likely too strong to allow policymakers much breathing room. The likely impact is to keep policy in tightening mode and to keep pressure on risk assets,” said Matt Peron, director of research at Janus Henderson Investors, in emailed comments.
“We are not out of the woods yet, but should be getting closer as the impact of aggressive policy starts to take hold. It’s too early to go on offense but stay invested, albeit defensively,” he said.
The data underlined the labor market’s role in the inflation battle, said Steve Rick, chief economist at CUNA Mutual Group, ina note.
“If unemployment remains low, employers will increase wages to attract talent, creating more disposable income. Increased purchasing power will then lead to increased demand for goods and services, spiking prices and potentially causing the Fed to raise rates even more.”
Federal Reserve Gov. Christopher Waller late on Thursday said he doesn’t expect the jobs report to change anyone’s thinking at the central bank. “A jobs number [around 260,000] along with the job openings rate reported on Tuesday would show that the labor market is slowing a bit but is still quite tight. As a result, I don’t expect tomorrow’s jobs report to alter my view that we should be focused 100% on reducing inflation,” he said.
Of course, it’s in the Fed’s interest not to signal a pivot in policy until it’s ready to make one, given its belief that keeping financial conditions tight will help to reduce inflation. New York Fed President John Williams will have the opportunity to comment on the data when he speaks at 10 a.m. ET.