NEW YORK — After a report indicated that the economy is still being driven by a robust job market, albeit one that may be a little too strong, Wall Street is remaining mostly stable on Friday.
Although the S&P 500 started trading with a 0.1% increase, it was still headed for its first losing week in the previous ten. As of 9:40 am Eastern time, the Nasdaq composite was up 0.1% and the Dow Jones Industrial Average was down 4 points, or less than 0.1%.
In response to the jobs report that revealed U.S. employers had unexpectedly increased hiring last month, Treasury yields increased in the bond market. Workers’ average hourly pay increased as well, contrary to economists’ predictions that it would decline.
For workers, these high numbers are encouraging, and they should maintain the economy.
Wall Street, however, is concerned that the solid data may also persuade the Federal Reserve that inflation is still trending upward. Thus, it’s possible that the Fed will keep interest rates high for a longer period of time than anticipated. For markets that have already risen sharply on expectations that the Fed will significantly lower rates this year, that could be bad news. The other major factor influencing stock price determination is interest rates.
Due to the jobs report, traders had to lower their expectations that rate cuts will start in March. Based on data from CME Group, they are now betting on a 56% chance of that, down from nearly 89% a week ago.
The yield on the 10-year Treasury swept back to 4.05%, up from 4.00% late Thursday and from less than 3.80% last week. High rates and yields slow the economy by discouraging borrowing and spending. They also hurt prices for investments and raise the pressure on the financial system.
This week’s pullback for stocks is not a surprise for many on Wall Street, who had been calling its big run since autumn overdone. Critics say the number of rate cuts traders are betting on for 2024, which is double the three that the Federal Reserve has indicated, is unlikely unless a recession occurs.
On Wall Street, Constellation Brands climbed 2.5% after the seller of Corona and Modelo beers in the United States reported stronger profit for the latest quarter than analysts expected.
Credit: San Choe, AP.
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