4:09pm: Nasdaq Composite salvages positive week despite Friday losses
The Dow closed Friday up 75 points, 0.2%, at 32,802, while the Nasdaq Composite dipped 63 points, 0.5%, to 12,658 and the S&P 500 ticked 7 points lower, 0.2%, to 4,145. The benchmarks all ended higher on the week though, despite the Nasdaq Composite and S&P ending the day in negative territory.
The week ended with a volatile day of trading in response to the July jobs report. The US added 528,000 jobs last month, well ahead of a Dow Jones estimate of 258,000. The unemployment rate dropped to 3.5%, compared to a 3.6% estimate. Meanwhile, wage growth increased 0.5% from June and came in 5.2% higher than a year ago.
That could mean more rate increases from the Federal Reserve, according to Art Hogan, chief market strategist at B. Riley Financial.
“Anybody that jumped on the ‘Fed is going to pivot next year and start cutting rates’ is going to have to get off at the next station, because that’s not in the cards,” Hogan said, according to CNBC. “It is clearly a situation where the economy is not screeching or heading into a recession here and now.”
12.05pm: US stocks struggle while labor market is on fire
All three major US indices were in the red at midday, as the American economy added more than 500,000 jobs in July, causing investors to fear the US Federal Reserve’s next move in September on inflation rates.
The Dow Jones Industrial Average was down 0.5% at 32,577 points, the S&P 500 was down by 0.8% at 4,117, and the Nasdaq Composite was down by 1.3% at 12,559.
The US economy is still firing on all cylinders if today’s jobs report is anything to go by, pointing the way to more rate increases this year, according to Chris Beauchamp, chief market analyst at online trading platform IG.
Beauchamp noted that equities, "wobbled in the wake of today’s US jobs report, but have managed to stabilise during the course of the afternoon, suggesting that this bear market bounce is not doomed yet.
“The solid jobs number, falling unemployment rate and rising wage figures show that the US economy, unlike many others, continues to strengthen, even as the Fed ratchets up its tightening programme. Thus it appears that the Fed can push on yet further, putting another 75 bps rise in play for September. This has put new fight into the dollar, but equities have seen the positive side too, shrugging off losses on hopes that the US consumer can remain resilient too,” Beauchamp said.
At midday, the major movers included software production company Atlassian (NASDAQ:TEAM) up 13% as their 4Q earnings beat estimates, plus Constellation Energy was up 8.5% on strong 2Q results.
Also at midday, Warner Bros Discovery was down 17% on the company’s strategic reset, which included the cancellation of the DC film “Batgirl” on August 2. Monster Beverage was down 6% on disappointing 2Q earnings results that were down by 25%.
11.40am: Proactive North America headlines:
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Amur Minerals jumps on agreed sale of Kun-Manie
Tocvan Ventures completes seven RC drill holes at Pilar project in Mexico; results expected later this month
AMC Entertainment narrows losses, thanks to Tom Cruise and food margins
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Great Panther Mining closes sale of Mexican subsidiary
Stuhini Exploration closes first tranche of private placement raising aggregate gross proceeds of $1M
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9.35am: Employment data deflates recession fears
US stocks plummeted into the red at the open on Friday after jobs data for the month of July showed the American labor market remains red-hot despite inflationary pressures and talk of layoffs.
Just after the open, the Dow Jones Industrial Average had dipped 210 points or 0.6% at 32,510 points, the S&P 500 was down 40 points or 0.9% at 4,113 points, and the Nasdaq Composite was down 172 points or 1.3% at 12,548 points.
Kingswood Holdings Limited (LSE:KWG) investment strategist Rupert Thompson said today’s employment numbers made it all the more unlikely that the US had entered a recession, as consecutive falls in GDP seen in both the first and second quarters would normally suggest.
“The data can only encourage the Fed to continue tightening policy at a rapid pace, particularly as wages posted another strong gain in July and there is minimal sign yet of any easing in underlying inflation pressures,” Thompson said.
In terms of major movers, Virgin Galactic Holdings Inc (NYSE:SPCE) shares had sunk about 16% at the open after Truist Financial analyst Michael Ciarmoli changed his rating on the stock to “sell” after the space tourism company announced it had again delayed its first commercial launch to 2Q 2023.
Block Inc (NYSE:SQ) was down about 3% after it reported disappointing quarterly results after the bell on Thursday, while Lyft Inc (NASDAQ:LYFT) shares soared about 5% after the ride-share company posted an earnings beat.
8.40am: Jobs data surprises
The American labor market continues to remain tight with new data from the US Bureau of Labor Statistics released this morning showing that total US non-farm payroll employment rose by 528,000 - more than two times higher than the 250,000 figure expected by analysts.
The nation’s unemployment rate edged down to 3.5% (or 5.7 million people), whereas analysts had expected this measure to remain steady at 3.6%.
“Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care,” the US Bureau of Labor Statistics said. “Both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels.”
Shortly after the release of the data, futures for the three major US indexes had turned red, with the Dow Jones Industrial Average down 0.4%, the S&P 500 down 0.7%, and the Nasdaq Composite down 0.9%.
6.30am: Jobs jobs jobs
US stocks were expected to open flat on Friday, with all eyes on the crucial US non-farm payrolls figure for July amid prevailing fears of a recession in the world’s biggest economy.
Futures for the Dow Jones Industrial Average were trading 0.1% higher pre-market, while those for the broader S&P 500 index were flat, and contracts for the tech-laden Nasdaq-100 were down 0.2%.
“Today’s July payrolls are expected to see 250k jobs added, which coincidentally was the forecast for June, which was beaten quite comfortably,” said Michael Hewson, chief market analyst at CMC Markets UK.
“It will still be the lowest number this year, however, the strength of the labor market may well be starting to increase in the level of importance when it comes to how aggressive the Fed is likely to be when it comes to tackling inflation,” he added.
If the labor market shows signs of weakening, the US Federal Reserve may well be dissuaded from continuing on its aggressive path of interest rate increases. While the rate setters’ primary concerns are about reining in inflation, they are also hoping that their actions do not plunge the country into a prolonged period of weak growth.
“A weak jobs number could temper the Fed’s hawkishness, but it would have to be a shockingly low number, or even negative,” said Hewson.
Additionally, he noted weekly jobless claims have been rising steadily for three months and are back above 250,000. “The rise in jobless claims appears to be the first sign the US labor market is showing signs of weakness even if this isn’t being reflected in the actual numbers,” added Hewson.
He also noted that the fall in bond yields suggests that markets are ignoring the central bank's tightening, and focusing more on a looming slowdown and recession.
In energy markets, crude oil prices were under the $100 level amid concerns about weaker global demand. WTI crude futures were up 0.3% at $88.47 a barrel while Brent crude futures were up 0.4% at $94.48.
Contact the author at jon.hopkins@proactiveinvestors.com