On Friday, the U.S. stock market experienced a decline after an initial surge triggered by a jobs report indicating a slight increase in the unemployment rate. Additionally, Treasury yields exhibited volatility, fluctuating between highs and lows.
The Nasdaq Composite, dominated by technology stocks, exhibited fluctuations and erased gains of up to 0.70%. Currently, it is down 0.05% at 14,027.43 points. The S&P 500 remains close to the 4,500 mark, up 0.11% at 4,512.79 points. The Dow Jones Industrial Average is up 0.21% at 34,793.44 points.
Energy and Materials sectors are leading the way with seven out of the 11 S&P sectors currently in positive territory.
The Bureau of Labor Statistics reported that 187K nonfarm payrolls were added in August, exceeding the expected 170K figure and the revised July number of 157K. The unemployment rate rose to 3.8% from the previous reading of 3.5%.
Seeking Alpha contributor Damir Tokic commented on the labor market, stating, “The labor market is decelerating with negative revisions to previous months. Wage growth is slowing down, participation rate is increasing, showing overall normalization. However, wage growth remains high and does not yet account for strikes and potential unionization risks.”
Tokic added, “Based on the August employment report, the stock market is likely to continue pricing in a soft landing scenario due to the 0.2% increase in wage growth M/M, which supports the Fed’s pause in September. However, the rally is expected to be short-lived as the upcoming CPI is anticipated to show a significant increase in inflation to 3.8%, according to Nowcast. It is too early to declare victory over inflation.”
Treasury yields initially reacted to the nonfarm payrolls data by moving lower, but have since reversed course and are now higher. The 10-year yield is up 10 basis points to 4.19%, while the 2-year yield is up 3 basis points to 4.89%.
For real-time data on Treasury yields, visit the Seeking Alpha bond page.
This week’s economic data has indicated signs of cooling in the labor market. The jobs report will play a crucial role in determining whether the Federal Reserve will continue with rate hikes. Soft JOLTS and ADP data, along with an increase in job cuts reported by Challenger, have raised hopes for steady rates.
In August, U.S. stocks closed in negative territory, with the S&P 500 posting its second negative month of the year and the Nasdaq Composite recording its worst monthly performance. Concerns over higher rates, a sell-off in bonds, a pullback in technology, and unexpected moves from credit rating agencies have influenced sentiment in August.
Deutsche Bank’s Henry Allen commented on the market performance in August, saying, “August has been challenging for financial markets, with only 12 out of the 38 non-currency assets we track registering positive returns for the month. Factors contributing to this include the expectation of higher rates for a longer period and the 10-year US Treasury yield reaching its highest level of this cycle so far.”
All things considered, we saw a recovery in the last week of August after soft economic data, particularly in Europe and China, led to concerns about the near-term outlook. However, August managed to outperform February, where only 11 out of the assets we track were positive,” Allen added.
Dell Technologies experienced a significant surge in its stock price after beating quarterly estimates, with Wall Street seeing further potential based on artificial intelligence.