CM – US stocks close lower on job report

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The S&P 500 ended the week down 1.9%, while the Dow Jones Industrial Average was down 0.3%. The tech-heavy Nasdaq Composite lost 4.5% in its worst week since February. And the turmoil is not limited to the stock market: the yield on 10-year government bonds jumped five times in a row to their highest level since January 2020 before the pandemic spread aggressively in the United States.

The week was marked by volatile equity and bond markets as investors fled some of the most popular trades of the past year and analyzed signals from the Federal Reserve on the way to rate hikes. With bond prices falling and government bond yields skyrocketing, investors have given up stocks of tech and growth companies, particularly some of the most speculative bets in these sectors.

The S&P 500 started the new year on Monday with a new record, but came under renewed pressure after the Federal Reserve Protocol confirmed its intention to withdraw stimulus, suggesting it would do so sooner and faster due to high inflation than previously planned. The broad stock market index and other major indices ended the week with the worst performance in the first five trading days of a year since 2016. On Friday, December’s job report was the latest of several confusing signals about the economic recovery that investors are assessing .

« The markets here are a bit scared of the logs and maybe a little bit of what they see in the job market, » said

Mona Mahajan,

Senior Investment Strategist at Edward Jones.

The job report showed that the US created 199,000 jobs in December, less than the 422,000 expected by economists surveyed by the Wall Street Journal. Still, 2021 ended with the creation of a record number of jobs in the US. The unemployment rate fell to 3.9%.

Analysts struggled to gauge job growth during the pandemic and the government is getting less data from employers. Investors are also struggling with a factor that they have mostly ignored for the past decade: inflation. The latest job report showed that the average hourly wage in December was up 4.7% year-over-year, well above wage growth of around 3% before the pandemic and on top of the historically high inflation numbers that have unsettled investors.

Some investors contributed to the uncertainty that they expected that the Omicron variant would possibly hinder employment growth in the coming months.

The S&P 500 slipped for the fourth time in a row, losing 19.02 points, or 0.4%, to 4677.03 on Friday. The Nasdaq Composite Index lost 144.96 points or around 1% to 14935.90. The Dow Jones Industrial Average fell 4.81 points, or less than 0.1%, to 36231.66.

The Federal Reserve minutes released on Wednesday helped boost government bond sales, according to the monthly labor market report was continued. Investors have priced in the possibility of earlier rate hikes and the Fed to shrink its bond portfolio in the near future. The yield on the ten-year benchmark government bond leveled off at 1.769%, making it the largest three-week gain since 2019.

« Everything that happened in the markets this week was about expectations of how quickly the Fed will tighten policies, » said

Fahad Kamal,

Chief Investment Officer at Kleinwort Hambros. “This is a year of transition in which we are moving from record political support to actual tightening. There will be tremendous volatility as we figure out how to work in this paradigm. ”

As investors have fled technology stocks, many have pushed their way into cyclical corners of the market like energy and financial companies. These groups have outperformed and made gains this week as the broader market has declined. The S&P 500 energy company gained nearly 11% this week while the financial sector rose 5.4%.

Shares in tech heavyweights, sensitive to interest rate expectations, slumped this week. Alphabet shares fell around 5.4% while

Netflix

decreased by about 10%. Shares in

Cathie Woods

The flagship exchange-traded fund ARK Innovation was down almost 11%.

Below the surface, sales were even more extreme. Nearly 40% of the Nasdaq Composite’s stocks are down 50% below their 52-week highs, while nearly two-thirds are in bear markets, or 20%, according to Sundial Capital Research. This underscores how volatile individual stocks have been as investors position themselves for the next phase of economic recovery.

In company news, meme stock

GameStop

The stock rose 7.3% – which means even bigger gains from the earlier session – after the Wall Street Journal reported that the company was planning to enter the cryptocurrency and non-fungible token market.

Oil prices have gone up this week. The global benchmark Brent crude rose 5.1% to $ 81.75, ending the third week in a row with gains. According to analysts at ING, oil supplies could potentially be lower due to the cold weather in North Dakota and Alberta, Canada, and if protests in crude oil producer Kazakhstan affect production.

In Asia, the major equity benchmarks were mixed. The Shanghai Composite Index fell 0.2% while the Hong Kong Hang Seng Index rose 1.8%, led by gains in technology stocks. South Korea’s Kospi index rose 1.2%.

Corrections & AmplificationsGameStop rallied ahead of the market. In a previous version of this article, GameStop was incorrectly referred to as GameStock. (Corrected January 7th)

Appeared in print January 8, 2022 as’ U.S. The markets are bumping into the first week of 2022. « 

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