4:13pm: Indices fell into the red after midday
The Dow closed Friday down 338 points, 1.1%, at 31,319, the Nasdaq Composite lost 154 points, 1.3%, to 11,631 and the S&P 500 slipped 42 points, 1.1%, to 3,924.
The benchmarks started positive but turned sour in the afternoon, clinching their third-straight week of losses. For the Nasdaq Composite, Friday was the sixth-consecutive losing day.
Investors couldn't make a mini-rally, prompted by promising jobs data for August, last more than a half day.
“There’s still a lot of nervousness around what we’ll see over the next few months,” said Callie Cox, US investment analyst at eToro, according to CNBC. “Yes, inflation and the job market are coming back into balance, but at what cost? Markets are still figuring that out.”
She continued, "To make matters worse, the S&P 500 is trapped in the danger zone – below its three big moving averages. Those moving averages served as floors up until a few weeks ago. Now, they seem to be ceilings that the index just can’t bust through. The mood has definitely changed. While we may not test the lows of this sell-off again, we also may not reach new highs any time soon.”
12.05pm: US indices green-lit at midday
The major US indices were still in positive territory midway through the session ahead of the long weekend, as traders pondered whether one month of jobs data is a guarantee this trend will continue.
At midday, the Dow Jones Industrial Average was up 1.2% to 32,008, the S&P 500 was up by 1.3% at 4,015, while the Nasdaq Composite was up by 1.1% at 11,917.
James Knightley, chief international economist at ING, said the aim is to pull off a balanced economy with steady growth, including the job market, and to decrease inflation.
“The August employment report paints a very positive picture regarding the current state of the US economy with solid jobs growth yet signs that supply strains are easing as workers return to the labour force. With wage growth coming in lower than expected it points to a slower pace of rate hikes after September's expected 75 basis point move,” Knightley said in a statement.
Knightley said the establishment survey of employers shows broad-based gains across virtually all sectors. There was no one real standout with trade and transport up 65k, education and health up 68k and leisure and hospitality up 31k. Only Federal government saw a fall.
“The household survey (used to generate the unemployment rate) was even more impressive. It reported employment rising 442,000. However, the eye-catching thing was the jump in worker participation to 62.4% from 62.1%, with the civilian labour force increasing 786,000 in August,” he said.
“Consequently the unemployment rate rose to 3.7%, but for a really positive reason. It looks as though workers may finally be returning as the rising cost of living and higher wages, together with rapidly receding COVID caution, incentivise finding a job. Wages themselves rose a little less than expected at 0.3% month-on-month versus 0.4% consensus, but the year-on-year rate held steady at 5.2% for the third consecutive month,” said Knightley.
At midday, the major movers included Lululemon, up 9.4% as its outlook and earnings beat expectations yesterday. Identity management software company Okta, which fell yesterday by 32% on news of its difficulty in merging with Auth0, was back in the green, up by 8.2%. Graphics chip maker Nividia, which shed 7.7% in premarket trading, rose by 0.4%.
10.40am: Proactive North America headlines:
Shell boss to step down next year - report
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CleanSpark mines 395 Bitcoin in August as hashrate ramps up
Silverton Metals closes acquisition of Snow Lake lithium property
Trees Corporation receives license to operate in British Columbia and begins closing its Vancouver Island retail acquisitions
Maverix Metals acquires portfolio of 22 royalties from Barrick Gold Corp
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Wellteq Digital Health agrees to acquisition by Australia's Advanced Human Imaging
Cloud DX announces appointment of Gaurav Puri to its board
9.35am: Market reacts positively to August employment report
US stocks opened higher on Friday after the release of the key August jobs report pre-market did not bring any major surprises.
Just after the open, the Dow Jones Industrial Average had added 255 points or 0.8% at 31,911 points, the S&P 500 was up 38 points or 1% at 4,005 points, and the Nasdaq Composite was up 94 points or 0.8% at 11,879 points.
Titan Asset Management chief investment officer John Leiper commented that the non-farm payroll data had taken on greater importance this week in the wake of Jerome Powell’s Jackson Hole speech.
“Bottom line, these are positive numbers but will do little to change the 75 basis point versus 50 basis point rate hike,” he said. “All eyes now turn to the next US inflation print on September 13th.”
Monex Europe head of FX analysis Simon Harvey said August’s payroll report was seen as disappointing on the whole, as the market’s expectations were largely set higher than analysts’ following yesterday’s ISM report that showed firms’ hiring intentions increased over the past month.
“With economic conditions likely forcing more economically inactive individuals back into the labour market, today’s report suggests that downward pressure may soon start to be exerted on historically high wage growth,” Harvey said.
“Should this occur in subsequent labour market reports, it will ease the emphasis on the Fed to aggressively tighten policy, as they currently wish to reduce labour demand to diminish its effects on wage growth in a historically tight labour market, and in turn, the persistence of inflation.”
8.35am: Labor market remains tight
Hiring remained strong in August despite the Fed's series of interest rate hikes, according to new employment data from the US Bureau of Labor Statistics.
The highly anticipated non-farm payrolls report showed that the nation added 315,000 jobs in August, slightly above the consensus analyst expectation of 300,000.
“Notable job gains occurred in professional and business services, health care, and retail trade,” the Bureau said.
Unemployment, which was forecast to remain stable at 3.5%, unexpectedly rose to 3.7%.
In July, the number of unemployed persons had returned to its pre-pandemic level.
Shortly after the release of the data, futures for the Dow Jones Industrial Average rose 0.6%, the S&P 500 0.8% and the Nasdaq Composite 0.8%.
6:30am: How tight is the labor market?
US stocks were expected to open little changed in cautious trading on Friday as traders await the crucial August non-farm payrolls data which will likely play a significant part in the outlook for interest rates 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 also up 0.1%, and futures for the tech-laden Nasdaq-100 were flat.
As things stand, US rate-setters have indicated that they will stick to an aggressive path of interest rate hikes and a strong payroll number will solidify expectations of another 75-basis-point increase at the upcoming rate-setting meeting, a factor that continues to weigh on equities.
“All eyes are on the US jobs data today - the US is expected to have added around 300,000 new nonfarm jobs in August,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank said, noting that “another strong NFP print will guarantee a 75bp hike in FOMC’s September meeting.”
The non-farm payrolls data is due out at 8.30am ET.
The continued strength of the labor market has been a key factor in the Federal Reserve’s pursuit of higher interest rates as it fights to tackle runaway inflation which is still hovering around 40-year highs. Over recent months, non-farm payrolls have risen rapidly, often surpassing expectations, suggesting that the wider economy can withstand aggressive interest rate hikes although many watchers still fear that the US will slip into a recession.
“Presently, investors are braced for another strong NFP read, and activity on fed funds futures gives around 75% chance for a 75bp hike in September. We could see this probability spike higher in case of strong NFP data - which would mean higher US yields, a further advance in the US dollar, and some more negative pressure on stock valuations,” noted Ozkardeskaya.
“But, if today’s NFP print is in line or ideally softer-than-expected - as the Federal Reserve would like it to be, then we could see a certain relief in the US yields, a rebound in equity markets and hopefully a downside correction in the dollar before the weekly closing bell,” she added.
Some sections of the markets are hoping for a softer reading after Wednesday’s ADP private sector jobs report for August showed payrolls grew by just 132,000, lower than the 268,000 jobs added in July and below the 300,000 increase that analysts were expecting for the month.
Elsewhere, news of COVID-19-related lockdowns in China was also weighing on market sentiment as investors worry about a slowdown in economic activity.
Separately, shares in chipmaker Nvidia Corp are expected to remain under pressure, having dropped around 7% yesterday, after the US said the tech firm may not be able to sell some processors to China without special licenses.
Contact the author at jon.hopkins@proactiveinvestors.com