Published: Sun, February 04, 2018
Economy | By

Stocks lower after positive jobs report spurs concerns of Fed interest hike

Stocks lower after positive jobs report spurs concerns of Fed interest hike

The losses piled up for the Dow Jones Industrial Average (DJI - 25,520.96) as the day wore on, with the index settling near session lows, down 665.75 points, or 2.5%.

JOBS DATA: U.S. employers added a robust 200,000 jobs in January, slightly above market expectations for a 185,000 increase. On a year-on-year basis, average hourly earnings rose 2.9 percent, the fastest pace since June 2009. Yields for 10-year Treasurys hit four-year highs Friday.

Yet fund managers say that the recent rise in yields helps bring interest rates back to more natural levels after years of massive intervention by central banks in response to the 2008 financial crisis.

"The big picture concern is that wage growth will pick up and lead to more inflation", said Nicholas Colas, co-founder at DataTrek Research.

Bond market strategists had expected a more gradual rise in bond yields, which move opposite price.

As a result, Ms Patel is selling some of her high-yield "junk" bond holdings and buying growth-focused equity sectors like technology and healthcare, leaving her overall bond allocation near multi-year lows, she said. "Rates have risen fairly quickly this year and the speed of the advance is worrying". At its lowest point, the Dow was down 426.87 points.

On Thursday the S&P 500 and Nasdaq on Wall Street fell, although the Dow edged up. The biggest losers were Exxon Mobil (XOM) and Chevron (CVX), which fell 5.1% and 5.6%, respectively. Half of the index's companies have reported, 78 per cent of which beat Street expectations, according to Thomson Reuters data.

Elsewhere, oil edged lower, though still trading near its highest level since 2015 in NY.

The energy group retreated 2.1 per cent. Suncor Energy Inc. slipped 1.3 per cent to $44.03, and Canadian Natural Resources Ltd. dropped 1.2 per cent to $42.

Tokyo ended 0.9 per cent down while Singapore shed 0.2 per cent and Seoul dived 1.7 per cent. Hong Kong, which in January chalked up a series of records, finished down 0.1 per cent. On the Nasdaq, 1,578 issues fell and 788 advanced.

Gold prices also took a roughly 1% weekly loss.

The Canadian dollar was trading 1 per cent lower at 80.65 US cents.

Reuters picNEW YORK, Feb 1 ― United States stocks opened lower today, following a string of lackluster earnings and after the Federal Reserve raised its inflation outlook and flagged "further gradual" interest rate hikes.

Yields on the 10-year U.S. Treasury note shot up to a four-year high within five minutes of release of the Labor Department's unemployment report for January.

However, nonfarm productivity fell 0.1 percent in the fourth quarter, which was the first drop since the first quarter of 2016, while unit labor costs rose 2.0 percent in the final three months of 2017.

"What is good for the average American worker ends up being negative for stocks because it increases the odds of further rate hikes", said Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee.

MSCI's all-country world index.MIWD00000PUS of equity performance in 47 countries fell 1.8 percent while its gauge of emerging market stocks.MSCIEF lost 1.43 percent.

The Stoxx Europe 600 Index decreased 1.4 percent, wiping out gains this year with its fifth consecutive decline. The Japanese yen JPY= weakened 0.64 percent versus the greenback at 110.12 per dollar. The gap between 10-year Treasury Inflation Protected Securities (TIPS) and 10-year Treasury notes reached its widest since September 2014.

West Texas Intermediate crude fell 1.2 percent to $65 a barrel. The Russell 2000 index of smaller-company stocks gave up 14 points, or 0.9 percent, to 1,565.

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