4:05pm: US stocks red at the close
US stocks finished Friday in the red as inflation and other concerns continue to weigh on the minds of investors.
At the close, the Dow had slipped 99 points to 32,899 points.
The S&P 500 was down 24 points at 4,123 points, with the Nasdaq slipping 173 points to 12,145 points.
12:05pm: US stock sell-off continues
US stocks remained in the red at noon on Friday as investors mulled another solid US jobs report.
At midday, the Dow was down almost 1% or 295 points at 32,703 points.
The S&P 500 and the Nasdaq had dipped 1% and 1.3% respectively.
IG chief market analyst Chris Beauchamp said, while the April job figures showed wage growth was not as strong as expected, the overall picture supported the Fed’s plan for further tightening of policy.
“Investors continue to fret about the possibility of a recession in the US and elsewhere caused by monetary tightening,” Beauchamp said.
“Earnings season has done little to assuage concerns about pressured consumer spending, leaving markets on the back foot once again.”
9:45am: US stocks slide following release of April employment figures
US stocks are expected to continue declining today as the release of April jobs data showing strong employment gains did little to calm investors' fears about wage pressures amid a tight labor market.
Shortly after the open, the Dow had slipped 329 points to 32,669 points.
The S&P 500 had lost 50 points at 4,096 points and the Nasdaq had shed 223 points at 12,095 points.
Tilney Smith & Williamson investment strategist Rob Clarry said the US economy continued to added jobs at a robust pace, indicating growing tightness in the labour market that would keep upward pressure on wages in the near term.
Clarry said the outlook for the labour market would largely depend on how many people return to the workforce, noting that the labour force participation rate of 62.2% remained below the pre-pandemic level of 63.4%.
"With public health improving, plenty of job openings and higher wages, companies will be hoping that more people return to employment to alleviate some of the tightness we are seeing,” he said.
“This would also help to reduce inflationary pressures and the probability of a wage-price spiral rearing its ugly head.”
Pantheon Macroeconomics chief economist Ian Shepherdson said the April jobs data demonstrated payrolls were strong but moderating and more evidence of slowing wage gains.
However, Shepherdson noted it was unclear whether the slowdown of payroll growth was a temporary hit triggered by the Ukraine war and pandemic jobs recovery, or an alarming downshift caused by the tightening of financial conditions.
“We think the latter is unlikely; it’s just too soon,” he said.
Shepherdson added that, despite Federal Reserve chair Jerome Powell being clear on Wednesday that the central bank intends to hike interest rates by 50 basis points in both June and July, if wages numbers continued to signal a meaningful slowing the July increase was not a done deal.
“Bear in mind that inflation will fall sharply over the next three months too, and we expect the housing market downturn to be undeniable in the data by then too,” he said.
8:40am: April job data points to 'unstagflation'
April was another strong month for job gains in the US, with the Labor Department reporting that non-farm payroll (NFP) employment increased by 428,000, marking the 12th straight month of job gains above 400,000.
The job figures exceeded a median analyst estimate from a Bloomberg survey of economists of 383,000 jobs.
The unemployment rate remains unchanged at 3.6% or 5.9 million people, comparable to the country’s pre-pandemic unemployment rate of 3.5% recorded in February 2020.
According to the Labor Department, job growth was led by gains in leisure and hospitality, manufacturing, and transportation and warehousing.
In an initial reaction, AvaTrade chief market analyst Naeem Aslam said “unstagflation” was the word that came to mind when looking at the jobs data.
“Basically, the US NFP number failed to bring any flare in the market. We have seen little to no reaction in the gold prices and in the equity futures,” Aslam said.
“However, here is something that is important to note, and that the US NFP data isn’t going off the rails and this is a positive news for the US economy.”
“The only thing which matters for the market is the inflation reading.”
6.30am: Futures point to further falls
US stocks were expected to open lower on Friday, retreating further after yesterday’s steep falls amid continuing fears that rising price pressures and a series of interest rate hikes are a threat to economic growth, with April non-farm payrolls due for release today.
Investors are clear that the Federal Reserve is set on a path of aggressive interest rate hikes after it decided on a 50 basis point (bp) increase on Wednesday, the first such hike in two decades.
Futures for the Dow Jones Industrial Average fell 0.2% in pre-market trading, while those for the broader S&P 500 index shed 0.3%, and contracts for the Nasdaq-100 lost 0.5%.
“The Federal Reserve ‘magic’ didn’t last long, and the US stocks recorded the worst day of the year yesterday, after posting the biggest gains of the year the day before, under the pretext that the Fed wouldn’t raise the rates by 75bp points,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, notiing that the Fed is expected to deliver 50 bps rate increases at its the next two meetings.
On Thursday, the Dow Jones Industrial Average and the S&P 500 dived over 3.5% while the Nasdaq Composite slumped over 5% as technology stocks took a heavy beating.
The closely watched US non-farm payrolls report, due at 8.30am ET, could trigger further stock price falls if the labor market in the world’s biggest economy continues to strengthen.
“Even though the Fed will turn a blind eye on softening jobs data in the coming months to focus on its fight against inflation, a strong NFP data could further revive the Fed hawks and the prospects of more aggressive Fed over the next couple of meetings, whereas a soft data could bring in some Fed doves,” noted Ozkardeskaya
“But again, the Fed must make a choice as it can’t boost growth and tame inflation at the same time,” she added.
The prospect of spiraling inflation and higher interest rates are making investors worry that the wider economy will weaken even as inflation stays elevated, debting corporate America in the process.
Benchmark crude oil prices continued higher, signaling that commodity price pressures are here to stay. WTI futures were up 2.2% at $110.62 a barrel while Brent crude futures rose 2.2% to $113.29 a barrel.
Contact the author at jon.hopkins@proactiveinvestors.com