Stocks crash after gloomy jobs report as markets hover

A week of volatile fluctuations on Wall Street ended on Friday with more losses for stocks, as a mixed batch of US labor market data sparked another dizzying trading episode.

The Standard & Poor’s 500 Index closed 0.8% lower after erasing an early 0.7% gain. The benchmark was coming out of a choppy stretch where it deviated by at least 1.2% in five consecutive days, pounded by uncertainty over the severity of the impact of the new variant of the coronavirus on the economy and when the Federal Reserve will end its overwhelming support to financial markets.

The Dow Jones industrial average slipped 0.2% and the Nasdaq composite lost 1.9%. The Russell 2000 index of corporate stocks fell 2.1%. All indices also posted a weekly loss.

Treasury yields fell, rose and then fell again as investors struggled to determine what the jobs report means the Federal Reserve will do on interest rates. Erratic moves fit in perfectly with a week where the S&P 500 went from a 1.9% gain to a 1.2% loss in one day.

“We’ve received mixed messages about the ‘jobs report data,’ and it can create messy markets,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

The report, which is typically Wall Street’s most eagerly awaited economic data each month, showed employers only created 210,000 jobs last month. This was a disappointing result as economists expected a much stronger hiring of 530,000, and raised fears that the economy will stagnate as inflation remains high. This is the worst-case scenario called “stagflation” by economists, and the arrival of the Omicron variant makes its probability more uncertain.

But other areas of the jobs report showed better strength. More and more people are returning to the labor market and the unemployment rate has improved from 4.6% to 4.2%.

These encouraging numbers helped Treasury yields climb briefly during the morning. But they also came from a section of the report on jobs that investors tend to take second to the job growth figure. This is because they come from different surveys, one with employers and the other with households, and many investors consider the employment growth figures to be the most reliable historically.

“Today’s nonfarm payroll report strikes me as messy,” said Jamie Cox, managing partner of Harris Financial Group. “Your best bet is to wait for revisions next month before you sound the stagflation alarm too loud.”

Some investors have said the jobs report may ultimately push the Fed to become more aggressive in raising short-term interest rates from their all-time low. Others, however, said they expected the mixed report to have no effect, and the large differences of opinion contributed to the sharp swings in the market for the day.

What the Fed decides is a huge deal for stocks, as low interest rates have been one of the main reasons the S&P 500 has roughly doubled since the early days of the pandemic. Low rates encourage borrowers to spend more and investors to pay higher prices for stocks.

The Fed has already started slowing or cutting its program of buying billions of dollars of bonds each month to support the economy and markets. President Jerome H. Powell rocked the markets earlier this week when he said the Fed could end its bond buying program months ahead of the June target it set for. This would open the door for the Fed to make the most important decision to raise short-term rates.

“With the headlines on Omicron and then determining if a faster cut also means a faster rise – and investors worried if the Fed is going to make a mistake – we are to expect some of that. this volatility, ”said Jacobsen of Allspring Global Investments.

Consider the two-year Treasury yield, which is heavily influenced by investor expectations for future Fed actions. It fell, then recovered briefly, then slipped to 0.59%. That’s down from 0.63% Thursday night.

The 10-year Treasury yield, which depends more on investors’ expectations for future economic growth and inflation, was also volatile. It zigzagged immediately after the jobs report was released and fell to 1.36% by late afternoon, from 1.44% Thursday night.

About 60% of S&P 500 stocks fell, with some of Wall Street’s recent biggest stars offering the heaviest weights.

Microsoft fell 2%, Nvidia slipped 4.5%, and Tesla fell 6.4%. They were part of a turnaround for high-growth companies that had previously dominated the market on expectations that they could continue to grow even if the economy was slow.

Energy futures were mostly down. The price of US crude oil slipped 0.4%. Energy stocks fell sharply. Exxon Mobil fell 0.6%.

In total, the S&P 500 lost 38.67 points to 4,538.43. The Dow Jones lost 59.71 points to 34,580.08. The blue chip index fluctuated between a gain of 161 points and a loss of 375. The Nasdaq lost 295.85 points to 15,085.47 points, while the Russell 2000 lost 47.02 points to 2,159. 31.

Chinese ridesharing service Didi Global Inc. said on Friday it would pull out of the New York Stock Exchange and move its listing to Hong Kong as the ruling Communist Party tightens its control over tech industries.

The Securities and Exchange Commission has decided to require foreign stocks listed in the United States, such as Didi’s, to disclose their ownership structures and audit reports, which could lead to delisting of some of them.

Markets around the world rocked over the week as investors struggle to reduce the damage the latest variant of the coronavirus will eventually cause to the economy.

With few concrete answers on Omicron, investors have groped and sent markets back and forth as minor clues leak out. It remains to be seen whether current vaccines are effective against the variant, whether people will be scared of companies because of it, and whether already high inflation will worsen because of it.

Associated Press editor Elaine Kurtenbach contributed to this report.