NEW YORK (AP) — Worries about the downside of a too-hot job market are keeping Wall Street in check on Friday, drowning out some big gains for Big Tech stocks.
Leaps for Meta Platforms and Amazon, which are two of the market’s most influential stocks, had the S&P 500 index 0.3% higher in morning trading. They also pushed the Nasdaq composite up 0.8%, as of 10:20 a.m. Eastern time. But the Dow Jones Industrial Average, which has less of an emphasis on tech, fell 116 points, or 0.3%.
Stocks were feeling pressure from higher yields in the bond market after a report showed U.S. employers hired many more workers last month than economists expected.
While the strength is a boon for workers and keeps the risk of a recession at bay, the worry is that it could keep upward pressure on inflation. That in turn would mean a longer wait for the Federal Reserve to begin cutting interest rates.
Hopes for such cuts, which can relax the pressure on the economy and goose investment prices, have been a major reason the U.S. stock market has surged to record heights. Fed Chair Jerome Powell said earlier this week that it’s unlikely cuts will begin as soon as traders had been hoping.
“The Fed threw some cold water on the idea of a March rate cut less than 48 hours ago, and today’s surprisingly strong jobs report won’t dry things off,” said Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.” It’s definitely not the type of data the Fed had in mind when they said they wanted to see more evidence that inflationary pressures were under control.”
The yield for the 10-year Treasury leaped immediately after the release of the jobs report and was up to 4.01% from 3.88% late Thursday.
The yield on the two-year Treasury, which moves more closely with expectations for the Fed, also rose sharply. It jumped to 4.36% from 4.21%.
Traders had already pushed out bets for the timing of the first Fed rate cut to May from March following Powell’s warning earlier this week. After the jobs report, some traders added to bets that the Fed may not make move until June, according to data from CME Group.
Besides the overall hiring number, the jobs report included many signals showing much more strength than expected. Average hourly earnings for workers rose more in January than forecast. The unemployment rate unexpectedly did not get worse. And the government said hiring was actually much stronger in December than it had earlier reported.
The question for the stock market will be whether the upside of such strength outweighs the downside. That is, will a stronger economy with plenty of people working make up for delayed or dashed hopes for quick and significant cuts to interest rates?
“The big payroll gains and wage gains aren’t something to be feared,” said Brian Jacobsen, chief economist at Annex Wealth Management. “The Fed has stepped back from its insistence that the labor market needs to weaken before inflation sustainably falls.”
He pointed to a report earlier this week that showed an increase in productivity for U.S. workers, which could help offset the effect of higher wages.
The jobs report landed on Wall Street amid a maelstrom of profit reports that could have helped move the market on their own.
Meta Platforms, the owner of Facebook and Instagram, soared 20.4% after it reported stronger profit for the latest quarter than expected and said it would start paying a dividend to its investors.
Amazon rallied 6.4% after it likewise reported stronger profit and revenue for the latest quarter than expected.
They’re both members of a small group of Big Tech stocks known as the “Magnificent Seven” that have been disproportionately responsible for Wall Street’s run to a record. Their huge gains have set expectations very high for their growth, which they need to meet to justify the big runs for their stock prices.
Apple, another member of the Magnificent Seven, fell 1.5% even though it reported better profit than expected.
Cigna and Chevron both climbed after reporting stronger profit for the last three months of 2023 than expected. Cigna jumped 5.6% for one of the biggest gains int he S&P 500, while Chevron rose 2.7%.
Keeping Chevron’s gain in check was a drop in oil prices. A barrel of benchmark U.S. crude dropped 1.3% to $72.84. Brent crude, the international standard, fell 1.7% to $77.38 per barrel.
In markets abroad, stocks tumbled 1.5% in Shanghai to cap their worst week in five years. Worries about a faltering economic recovery and troubles for the real estate industry have made the market one of the world’s worst recently.
The International Monetary Fund forecast the Chinese economy would grow at a 4.6% pace this year and 4% in 2025, dropping from 5.2% last year.
Stocks were mixed elsewhere in Asia and Europe.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.