U.S. stocks finished sharply lower Friday, but still booked their best weekly gains in a month, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy.
Investors also weighed a profit warning at a leading microchip maker ahead of next week’s increase in quarterly earnings results.
The Dow Jones Industrial Average
fell 630.15 points, or 2.1%, ending at 29,296.79, but off the session low of 29,142.66.
The S&P 500
dropped 104.86 points, or 2.8%, closing at 3,639.66.
The Nasdaq Composite
shed 420.91 points, or 3.8%, to finish at 10,652.40.
Stocks posted back-to-back losses, trimming weekly gains, but recorded their best weekly gains since Sept. 9, according to Dow Jones Market Data.
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What drove markets
Stocks recorded sharp losses Friday after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%.
Still, a powerful rally earlier in the week boosted all three major stock indexes to weekly gains, a departure from three straight weekly losses, according to Dow Jones Market Data.
“It’s manic. We are all on edge,” said Kent Engelke, chief economic strategist at Capitol Securities Management, of the sharp market swings.
“Any piece of good news is a cause for an explosive rally,” Engelke said by phone. On the flip side, he pegged technology-based trading “in an illiquid and emotional market” as exacerbating Friday’s selloff.
“It’s a reflection that people have re-entered the mind-set that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone.
Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.”
In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak.
Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price
gains this week after global crude producers voted to cut monthly production and with the U.S. dollar’s
surge this year against a basket of rival currencies.
U.S. crude oil prices climbed for a fifth day in a row on Friday to settle at $92.64 a barrel, while booking at 16.5% weekly gain.
New York Fed President John Williams said Friday that benchmark interest rates likely need to hit 4.5% over time. The Fed’s policy rate now sits in a 3%-3.25% range, up from a zero-0.25% range a year ago.
The benchmark 10-year Treasury rate
climbed to 3.883% Friday, as the key metric used to gauge the affordability of credit for businesses, household and the economy posted 10 straight weeks of gains, according to Dow Jones Market Data.
Read: Bond markets facing historic losses grow anxious of Fed that ‘isn’t blinking yet’
Investors continued to hope for relief on the inflation front and will be monitoring next week’s release of the September consumer-price index, as well as corporate earnings season as it picks up.
Companies in focus
shares fell 0.4% Friday after a judge delayed a looming trial between the company and Elon Musk to allow the Tesla Inc.
CEO more time to close his $44 billion acquisition of the social media platform.
Besides the jobs report, investors weighed a profit warning from microchip maker Advanced Micro Devices Inc. AMD, which said the PC market weakened significantly during the quarter. AMD shares fell 13.9%, and rivals including Nvidia Corp. NVDA and Intel Corp. INTC also closed lower.
U.S. cannabis stocks were choppy Friday, with the AdvisorShares Pure US Cannabis ETF
ending lower, following steep gains earlier in the week after President Joe Biden said the U.S. would consider de-scheduling cannabis from its current position as a Schedule 1 narcotic under federal law.
—Steven Goldstein contributed reporting to this article