Despite significant gains for major tech companies like Meta Platforms and Amazon, concerns about an overheated job market are tempering Wall Street’s overall performance. The S&P 500 saw a modest 0.2% increase in early trading, driven by leaps in Meta Platforms and Amazon, while the Nasdaq composite rose by 0.6%. However, the Dow Jones Industrial Average, less reliant on tech stocks, experienced a 0.4% decline of 146 points.
The surge in bond market yields, fueled by a robust jobs report that revealed higher-than-expected hiring, exerted pressure on stocks. While the strong job market is positive for workers and reduces the risk of a recession, there are worries that it might contribute to rising inflation, delaying potential interest rate cuts by the Federal Reserve.
The anticipation of rate cuts had been a key driver behind the record highs in the U.S. stock market. Federal Reserve Chair Jerome Powell’s recent statement suggesting a delay in rate cuts, coupled with the unexpectedly strong jobs report, further dampened hopes for imminent monetary policy changes.
Chris Larkin, Managing Director at E-Trade from Morgan Stanley, noted, “Today’s surprisingly strong jobs report won’t dry things off. 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.”
Following the jobs report release, the 10-year Treasury yield jumped to 3.99% from 3.88%, while the two-year Treasury yield, more closely tied to Fed expectations, rose to 4.33% from 4.21%.
The positive aspects of the jobs report, including higher-than-expected wage growth and a stable unemployment rate, are being weighed against concerns about delayed interest rate cuts. The stock market faces the challenge of determining whether a robust economy with a high employment rate can compensate for the potential delay in significant interest rate reductions.
Brian Jacobsen, Chief Economist at Annex Wealth Management, remarked, “The big payroll gains and wage gains aren’t something to be feared…The Fed has stepped back from its insistence that the labor market needs to weaken before inflation sustainably falls.”
Amidst the job market concerns, Wall Street also navigated through a wave of profit reports. Meta Platforms soared 18.7% after reporting stronger-than-expected profits and announcing dividend payments. Amazon rallied 7.2% with robust profit and revenue figures. However, Apple, despite beating profit expectations, saw a 2.3% decline in its stock.
Oil giants Exxon Mobil and Chevron reported stronger profits for the last quarter of 2023, but their gains were tempered by falling oil prices. Chevron rose 2.1%, and Exxon Mobil increased by 0.3%.
In global markets, Shanghai stocks dropped 1.5%, concluding its worst week in five years. Economic recovery concerns and real estate industry troubles contributed to this decline. Other Asian markets were mixed, while European markets saw modest gains.
Featured Image: Megapixl © Alexandersikov
