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Wall Street ends sharply lower as jobs report cements rate hike regime

Economy Oct 07, 2022 04:51PM ET
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© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 26, 2022. REUTERS/Brendan McDermid
 
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By Herbert Lash, Shreyashi Sanyal and Ankika Biswas

(Reuters) - Wall Street fell sharply on Friday following a solid jobs report for September that increased the likelihood the Federal Reserve will barrel ahead with an interest rate hiking campaign many investors fear will push the U.S. economy into a recession.

The Labor Department reported the unemployment rate fell to 3.5%, lower than expectations of 3.7%, in an economy that continues to show resilience despite the Fed's efforts to bring down high inflation by weakening growth.

Nonfarm payrolls rose by 263,000 jobs, more than the 250,000 figure economists polled by Reuters had forecast. Money markets raised to 92% the probability of a fourth straight 75 basis-point rate hike when Fed policymakers meet on Nov. 1-2, up from 83.4% before the data.

The job gains, lower unemployment rate and continued healthy wage growth point to a labor market Fed officials will likely still see as keeping inflation too high.

In the latest of a steady stream of hawkish messages by policymakers, New York Fed President John Williams said more rate hikes were needed to tackle inflation in a process that will likely increase the number of people without jobs.

The data cemented another jumbo-sized, 75 basis-point rate hike in November as "the labor market is still way too hot for the Fed's comfort zone," said Bill Sterling, global strategist at GW&K Investment Management.

"This was a classic case of good news is bad news," he said. "The market took the good news of the robust labor market report and turned it into an ever-more vigilant Fed and therefore potentially higher risks of a recession next year."

One economist said the Fed should not be reassured by the tight labor market because when the unemployment rate begins to rise, it does so quickly and is a leading indicator of a recession.

"We haven't felt the full effects of the tightening," said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities. "They're going to keep going until eventually this thing turns over, and when it turns over you won't be able to slow the momentum."

Next week's consumer price index will provide a key snapshot of where inflation stands.

Despite Friday's nosedive, a hefty two-day rally earlier in the week pushed the S&P 500, the Dow and the Nasdaq to post their first week of gains after three straight weeks of losses.

The Dow Jones Industrial Average closed down 630.15 points, or 2.11%, at 29,296.79, the S&P 500 lost 104.86 points, or 2.80%, to 3,639.66 and the Nasdaq Composite dropped 420.91 points, or 3.8%, to 10,652.41.

Volume on U.S. exchanges was 11.15 billion shares, compared with the 11.73 billion average for the full session over the past 20 trading days.

For the week, the S&P 500 rose 1.51%,the Dow added 1.99% and the Nasdaq gained 0.73%.

All 11 major S&P 500 sectors declined, with technology falling the most, down 4.14%.

The Philadelphia SE Semiconductor index fell 6.06% after a revenue warning from Advanced Micro Devices (NASDAQ:AMD) signaled a chip slump could be worse than expected. The index posted its biggest single-day percentage decline in more than three weeks.

GRAPHIC: Chips underperform on Wall Street - https://fingfx.thomsonreuters.com/gfx/mkt/jnvweqkekvw/Pasted%20image%201665158123924.png

AMD shares fell 13.9% as the company's third-quarter revenue estimates were about $1 billion lower than previously forecast. It was the largest declining stock on the Nasdaq 100.

FedEx Corp (NYSE:FDX) slid 0.5% after an internal memo seen by Reuters showed the division that handles most e-commerce deliveries expects to lower volume forecasts as its customers plan to ship fewer holiday packages.

Declining issues outnumbered advancing ones on the NYSE by a 5.78-to-1 ratio; on Nasdaq, a 4.56-to-1 ratio favored decliners.

The S&P 500 posted two new 52-week highs and 71 new lows; the Nasdaq Composite recorded 27 new highs and 337 new lows.

Wall Street ends sharply lower as jobs report cements rate hike regime
 

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Comments (48)
CT OREN
CT OREN Oct 08, 2022 11:08AM ET
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Good news! Hope the market will drop futher. Lets pray together!
Kerry Ditto
Kerry Ditto Oct 08, 2022 8:46AM ET
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they say friday's stock market was caused by Fed's rate hike fear due to good economic news. it is stupid logic or emotion. if the stupidity were true, fed want to destroy us stock market, destroying US economic growth stability, which means Fed wants to support Russia, not US during current hostility. wake up from the stupidity. smart folks could not be that stupid.
Joe Rizzuto
Joe Rizzuto Oct 08, 2022 8:27AM ET
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the fed is a** backwards. good news is good news. the fed has gone too far too fast. they will crush the labor market. we want a strong labor market. we want a soft landing. the fed should slow down.
Kerry Ditto
Kerry Ditto Oct 08, 2022 8:27AM ET
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agree. thank you. Fed should apologize to America people, stopping to help Russis.
Bala K
Bala K Oct 08, 2022 12:02AM ET
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what works in the market..support and resistance levels
Bala K
Bala K Oct 08, 2022 12:01AM ET
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just look at support and resistance levels...
Bala K
Bala K Oct 08, 2022 12:01AM ET
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just look at support and resistance levels...
Kerry Ditto
Kerry Ditto Oct 07, 2022 8:17PM ET
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probably with 99% chance fed will pause at coming meeting.
Kerry Ditto
Kerry Ditto Oct 07, 2022 7:55PM ET
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jobs report did not cement fed action. raising the rate just a few days before election day would be politically biased. so, fed would probably pause for goodness of all Americans. about one half of americans lean for one party. the other half for other party. fed should respect all Americans and pause.
Kerry Ditto
Kerry Ditto Oct 07, 2022 5:29PM ET
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wall street is for, by, of Americans. wall street is bigger than fed. wall street will dictate fed, not the other way around. wall street wants, needs fed pivot. fed has to obey wall street.
Chad Richer Than You
Chad Richer Than You Oct 07, 2022 3:43PM ET
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As Chad & Co move operations to the nearest bunker
 
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