US stocks fluctuate after strong jobs report

Wall Street stocks wobbled between gains and losses, following days of tumultuous trading after a strong US jobs report underscored expectations of the first US interest rate hike in a pandemic.

The S&P 500 blue-chip stock index fell 0.1% in early New York trades while the tech-focused Nasdaq Composite lost 0.3%, before gaining 0.1% and 0. 4% in recent trading session.

The moves come after both indexes fell sharply in the previous session as traders gauged signals from the Federal Reserve that it may quickly withdraw its supportive stimulus measures. economy during the peak of the pandemic.

Previous years double digit profit for global equities was boosted by the Fed and other central banks pushing borrowing costs to record lows as they bought large amounts of government bonds to insulate financial markets from shocks. of coronavirus.

Phillip Toews, chief executive officer of Toews Corporation, said: “The market is ripe for a correction, or larger, at this point.

“The combination of rising interest rates and soaring asset prices usually doesn’t end well.”

The US unemployment rate fell to 3.9% in December from 4.2% in November, according to data released on Friday by the labor department. This is stronger than the 4.1 percent forecast by Wall Street economists.

In another sign of a vibrant job market, average hourly earnings rose 4.7% year-on-year, from an upwardly revised 5.1% last month. The increase in employment, at 199,000, missed expectations of around 400,000.

“Other than headline salary numbers, this is a very strong jobs report,” said Jack McIntyre, fixed-income portfolio manager at Brandywine Global.

“Obviously this will make Fed officials more dovish towards the idea that they have to raise rates.” “But the market was positioned for a strong report.”

US Treasuries, which have been sliding this year, fell further in early New York trading on Friday, pushing yields higher. The 10-year yield jumped to 1.767 percent, sending it up 0.03 percentage points on the day and hitting its highest level since March 2021.

Earlier this week, minutes from the latest Fed meeting showed that officials were considering a timetable for a faster rate hike this year than investors expected to combat rising inflation. of America.

“If people who are looking for work don’t come back, while unemployment is low, then you will experience pressure on wages,” said Tatjana Greil Castro, co-head of public markets at credit investor Muzinich. lead to higher inflation. “So markets expect the Fed to tighten financial conditions.

U.S. consumer prices rose 6.8% in the year to November last year as consumer demand recovered from pandemic-related lows in 2020 and supply chain constraints.

Fed minutes show some Fed officials suggest The US central bank could raise interest rates even before its maximum employment target is reached, in a move that puts pressure on tech stocks.

The tech sector, home to a mass concentration of fast-growing groups, has been lifted in recent years by low interest rates, which boost the present value of companies’ projected future profits. . The S&P information technology index is down 3.5% this week, though it is up 0.2% on Friday.

In Europe, the regional Stoxx 600 share index fell 0.3%. The German 10-year yield rose 0.02 percentage points to minus 0.05%, and the Italian equivalent yield rose about 0.03 percentage point to 1.3%. The dollar index, which measures the US currency against six other currencies, fell 0.3%.

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