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S&P 500 and Nasdaq drop on Friday, but post weekly gains after jobs report blast in July

Stocks faltered on Friday in a volatile trading session after July’s jobs report came in much better than expected, as investors weighed what a strong labor market would mean for the tightening campaign Federal Reserve rates.

The Dow Jones Industrial Average gained 76.65 points, or 0.23%, to end at 32,803.47. Even with Friday’s gains, however, it fell on the week. The S&P 500 lost 0.16% to end at 4,145.19, and the Nasdaq Composite lost 0.50% on Friday, falling to 12,657.56. Still, the S&P 500 and the Nasdaq ended the first week of August up.

Losses were offset by bank stocks, which rose on hopes that interest rate hikes will continue apace. Energy stocks also rose, but technology companies fell.

The labor market added 528,000 jobs in July, easily beat a Dow Jones estimate an increase of 258,000. The unemployment rate fell to 3.5%, below the estimate of 3.6%. Wage growth also rose more than expected, up 0.5% for the month and 5.2% from a year ago, signaling that high inflation is likely still a problem.

Shares open at the bottom following the report, although it seemed to indicate that the economy was not currently in a recession. Job growth was expected to slow as the Fed continues to raise interest rates to tame inflation, but this report shows the labor market is still hot. This means that the central bank could act more aggressively at its next meeting.

“Anyone who jumped on the ‘Fed will pivot next year and start cutting rates’ will have to come down to the next station, because it’s not in the cards,” said Art Hogan, chief market strategist at B. Riley Financial. “This is clearly a situation where the economy is not collapsing or heading into a recession here and now.”

Friday’s jobs report is crucial because it’s one of two the central bank will see before deciding how much to raise rates at its September meeting. Indeed, traders are already betting on a Fed stance hardening. Policymakers will have another jobs report and two more consumer price indexes to weigh before the central bank makes its next rate decision.

Major averages posted their best month since 2020 in July on hopes the Fed would slow the pace of its hikes. The S&P 500 gained 9.1% last month.

Sources

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2/ https://www.cnbc.com/2022/08/04/stock-market-news-futures-open-to-close.html

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