Dow falls 600 points after strong jobs report, but stocks still on pace to snap 3-week losing streak

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US stocks fell sharply on Friday but were still on pace to break a 3-week losing streak, after September jobs data showed an unexpected drop in the unemployment rate, prompting monetary policy to keep tightening. It is expected to strengthen the Federal Reserve’s resolve.

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Investors are also weighing profit warnings on a major microchip maker.

What is happening
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According to Dow Jones market data, the stocks were on track for back-to-back losses, paring weekly gains, but were still on pace for their best weekly gains in nearly a month.

Reading: Will the stock market be open on Columbus Day?

what is driving the market
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Stocks fell after the Labor Department added 263,000 jobs to the US economy in September, while the unemployment rate dropped to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.

“It’s a reflection that people have re-entered the mindset that the Fed is going to raise rates at a faster clip, perhaps for longer than they suspected at the beginning of the week,” said Robert Pavlik, a senior portfolio senior. Said by phone manager at Dakota Wealth Management.

Pavlik expects the Fed to keep fiscal conditions tight to try to tackle inflation. “But once we turn the corner, and the economy slows, the Fed will probably be more aggressive in cutting rates along the way.”

Steve Rick, chief economist at CUNA Mutual Group, said in a note that the data underscored the role of the labor market in the fight against inflation.

“If unemployment remains low, employers will increase wages to attract talent, and create more disposable income. Increased purchasing power will lead to increased demand for goods and services, raising prices and potentially even more to the Fed. will lead to higher rates.

In addition, the Fed is “depleting liquidity from the system at a remarkable pace,” BlackRock’s chief investment officer for global fixed income, Rick Ridder, wrote in a Friday client note, while the central bank has an astonishing $1.3 trillion. pointing to a decline. Balance sheet since the peak of December 2021.

Pavlik at Dakota Wealth said he expects the Fed to begin slowing interest rate hikes by the middle of next year, which means continued pressure for the stock market, especially against the backdrop of the larger oil price CL00. with,
Gains this week with the US dollar’s DXY, after global crude producers voted to cut monthly output,
Bounce this year against a basket of rival currencies.

The energy component of the S&P 500 was one of the few corners of the stock market in the green on Friday, propelled by US crude oil prices to nearly $92 a barrel. In the exchange-traded fund, Energy Select Sector SPDR ETF XLE,
was also up 0.8%.

New York Fed Chairman John Williams said on Friday that there may be a need for benchmark interest rates To hit 4.5% of the time. Fed’s policy rate now Sits in 3%-3.25% range, but above the zero-0.25% range from a year ago.

Benchmark 10-Year Treasury Rate TMUBMUSD10Y,
Friday was close to 3.9%, a key metric used to measure credit affordability for businesses, households and the economy.

ReadingBond markets facing historic losses are worried the Fed is ‘not in the blink of an eye’

Federal Reserve Gov. Christopher Waller said late Thursday that he did not expect the jobs report to change the thinking of anyone in the central bank.

companies in focus

—Steven Goldstein contributed reporting this article

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