Federal Reserve Board Chair Jerome Powell.
Photgrapho by Olivier Douliery / AFP /Getty Images
U.S. stock benchmarks were lower in bumpy trading, with tech stocks underperforming after a strong U.S. jobs report prompted another advance in Treasury yields.
The Dow Jones Industrial Average gave up early gains to slip 70 points, or 0.2%, shortly after 11:15 a.m. The S&P 500 fell 0.7% and the Nasdaq Composite fell 2.1%.
The U.S. added 379,000 jobs in February, better than the 210,000 expected. The unemployment rate ticked slightly lower from last month, with a labor-force participation rate that was unchanged at levels well below last year. This comes as the economy reopens on the back of inoculations and investors look ahead to fiscal stimulus. U.S. officials and Wall Street strategists observed that the U.S. still had 9.5 million fewer payroll jobs than it did in February 2020.
“More strengthening is likely in the months ahead as [Covid-19] restrictions are eased. That said, we still expect the labor market (and inflation) to show significant net weakening for several years,” wrote strategists at TD Securities. “Unemployment is being understated by a drop in the participation rate.”
Treasury yields were higher again, though they also retreated from their early peak near midday, as investors continued to absorb signals from Federal Reserve Chair Jerome Powell that the central bank doesn’t see any imminent need to put a lid on long-term yields. The 10-year yield was around 1.57% in midmorning trading.
Thursday’s session saw the Nasdaq drop 2% after a 4.35% drop the prior two sessions. As a result, the tech-heavy index was near a so-called correction, at 10% below a Feb. 12 peak, with a loss of 9.7%. The Dow industrials and S&P 500 fell 1.1% and 1.3%, respectively.
Stocks have been declining—especially tech stocks that fared well during last year’s environment of falling rates and slow growth—as investors’ expectations for growth improve, pushing bond yields higher.
“Maybe, not giving in to every whim of the equity market being held hostage by every wobble in risk sentiment, reflects an awareness of the bigger picture—overvalued stock markets are more dangerous than slightly higher bond yields,” said Kit Juckes, head of currency strategy at Société Générale, to clients in a note.
Oil prices continued to climb on Friday, with U.S. crude and Brent futures up more than 2% each. U.S. prices logged their highest finish since 2019 on Thursday, after the Organization of the Petroleum Exporting Countries and its allies said they would rollover current production cuts to end-April.
Asian stocks finished mostly lower across the board, albeit with modest losses for the most part. The Nikkei 225 fell 0.2%, while China’s CSI 300 index lost nearly 0.4%. In China’s closely watched annual legislative summit, which kicked off Friday, leaders set a growth target of “above 6%” for 2021.
That goal would put the country back above levels seen before the Covid-19 pandemic, which appears to be largely under control there, for now. “The new target seems more flexible, perhaps given the still high uncertainties due to the pandemic,” noted analysts at Danske Bank.
The Stoxx Europe 600 was down 0.5%.
Among stocks on the move, shares of software infrastructure supplier and chip maker Broadcom (ticker: AVGO) were down 1.6% even after the company issued a quarterly earnings report that topped expectations late on Thursday.
Gap (GPS) shares were up nearly 6% after the company beat earnings estimates, posting a profit of 61 cents per share, above expectations for 19 cents. Sales came in at $4.4 billion, missing the mark of $4.6 billion.
Western Digital (WDC) shares rose 3.5% after Goldman Sachs upgraded the stock to Buy from Neutral.
Paycom Software (PAYC) shares rose 4.1% after Jefferies upgraded the stock to Buy from Hold.
Costco (COST) shares were down 2.6% even after Telsey Advisory Group reiterated its Outperform rating on the shares.
Write to Alexandra Scaggs at [email protected]
