Dow Drops 200 Points Despite Solid Jobs Report, Stocks On Track For Third Consecutive Week Of Losses

Dow Drops 200 Points Despite Solid Jobs Report, Stocks On Track For Third Consecutive Week Of Losses

Dow Drops 200 Points Despite Solid Jobs Report, Stocks On Track For Third Consecutive Week Of Losses

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The stock market collapsed on Friday despite the August jobs report coming in slightly lower than expected and falling significantly from last month, which did little to address investor concerns about more aggressive Federal Reserve rate hikes that would plunge the economy into recession. to dispel.

Key facts

Stocks gave up gains in the afternoon and turned negative: the Dow Jones Industrial Average fell 0.6%, about 200 points, while the S&P 500 lost 0.7% and the tech-heavy Nasdaq Composite 1%.

Shares initially opened higher after the U.S. economy added 315,000 jobs in August — slightly less than the 318,000 analysts had expected and much lower than the 526,000 new jobs added in July, according to data released Friday by the Labor Department. .

While the unemployment rate rose to 3.7% from 3.5%, the job market has remained strong despite the slowdown in economic growth this year, which Fed officials have argued as evidence that the economy can withstand more aggressive rate hikes without holding back. lapse into a recession.

The labor market is “less tight than it was in July” and “moving in the right direction for policymakers,” meaning overall this is a “good report for those concerned about the inflationary impact of a tight labor market,” says Jeffrey Roach, chief economist for LPL Financial.

Despite solid jobs numbers, stocks contributed to the losses this week and continued to fall amid aggressive comments from Fed officials that the central bank will continue to raise interest rates well into the next year and that it would be some time before a turnaround in monetary policy would take place.

Many Wall Street pundits are now warning that the prospect of the Fed raising rates “higher for an extended period of time” could deter markets from retesting their June lows, especially as September has historically been the market’s worst month on record. is.

Crucial Quote:

“The market is generally in a bad position: rising interest rates and too high inflation,” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance. “The Fed is somewhat on autopilot for the foreseeable future — they will raise interest rates anyway — but to the extent that economic data comes in this way, it could take some pressure off them in future meetings.”

Main background:

Shares ended higher on Thursday to start September, which has historically been a difficult month for markets. Still, all three major averages will post their third negative week in a row, continuing a slump that began in mid-August. Optimism about a potential linchpin of the Fed, which fueled the rally earlier this summer, has faded, especially after comments from Fed Chair Jerome Powell last week, who repeated aggressive rate hikes for the foreseeable future.

Read further:

Unemployment rate unexpectedly rose to 3.7% in August, while layoffs continue to rise (Forbes)

The stock market summer rally is over and investors should prepare for a rough September (Forbes)

Stocks break bearish line even as investors brace for market’s worst month (Forbes)

Market experts predict further volatility as Fed rate hikes leave ‘little room’ for a soft landing (Forbes)

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