U.S. stocks closed mostly lower on Friday in a volatile trading session as a stronger-than-expected jobs report reignited fears that the Fed would continue to aggressively increase interest rates in a bid to control rising inflation. The S&P and Nasdaq ended in negative territory. However, the Dow managed to close in the green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) climbed 0.2% or 76.56 points to end at 32,803.47 points.
The S&P 500 declined 0.2% or 6.75 points to close at 4,145.19 points. Consumer discretionary and communications services stocks were the worst performers.
The Consumer Discretionary Select Sector SPDR (XLY) declined 1.7%, while the Communications Services Select Sector SPDR (XLC) rallied 1.2%. Six of the 11 sectors of the benchmark index ended in negative territory.
The tech-heavy Nasdaq fell 0.5% or 63.03 points to finish at 12,657.55 points.
The fear-gauge CBOE Volatility Index (VIX) was down 1.35% to 21.15. A total of 10.6 billion shares were traded on Friday, lower than the last 20-session average of 10.8 billion.
Robust Jobs Report Dampen Investors’ Spirit
Stocks took a beating on Friday after data released by the government showed strong-than-expected job additions to the U.S. economy. In fact, there were more than 500,000 job additions in July, which once again raised concerns among investors that the Fed would continue with its steep rate-hike policy in a bid to cool the economy and check surging inflation.
Investors were earlier expecting a softer hike by the Fed in its September meeting after a few big companies announced their layoff plans, which gave them an impression that the labor market was softening. However, July’s jobs data painted a different picture.
Robust job additions to the economy in July have now reignited fears among investors as they now feel that the Fed may go for another 75-basis point interest rate hike in its next policy meeting.
The jobs data immediately triggered a sharp rise in the 10-year Treasury yield. This saw markets opening lower although the data indicated that the economy still isn’t into recession. The negative sentiment continued almost throughout the day with stocks swinging between gains and losses.
Tech stocks suffered the most. Shares of Meta Platforms, Inc. META declined 2%, while Amazon.com, Inc. AMZN fell 1.4%. Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
However, bank stocks gained on Friday on expectations that interest rate hikes would continue to help them. Shares of Citigroup Inc. C gained 0.8%, while Bank of America Corporation BAC advanced 1.7%.
The strong jobs data indicated that the economy may not still be in recession but it had a negative impact on markets. The Labor Department said on Friday that the U.S. economy added a solid 528,000 jobs in July. The unemployment rate declined to 3.5%, which had now equaled the lowest level attained since 1960.
Moreover, the report also mentioned that average hourly earnings increased by $0.15 per hour or 0.5% to $32.27.
Despite Friday’s decline, the S&P 500 and Nasdaq ended the week in the green. The S&P 500 ended the week up 0.4%, while the Nasdaq rose 2.2% for the week. However, the Dow ended the week 0.1% lower.
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