The Dow Is Falling, November’s Jobs Report Misses—and What Else Is Happening in the Stock Market Today
Fed Chair Powell acknowledged Tuesday that higher inflation wasn’t transitory.
Al Drago/AFP via Getty Images
The stock market was falling on Friday as investors digested the November jobs report. The labor market is stronger than the headline result would suggest, making the Federal Reserve more likely to act more hastily in removing monetary support from the markets and the economy.
In morning trading, the Dow fell 236 points, or 0.7%, one day after the blue-chip benchmark rallied 617 points. The S&P 500 was down 1.1%, while the Nasdaq Composite was down 2%. All three indexes initially rose after the weaker-than-expected jobs number was released.
The U.S. added 210,000 jobs for the month of November, lower than the expected 573,000 and lower than October’s result of 531,000. The unemployment rate fell to 4.2%.
Initially, the stock market took that report as good news. Any result above 200,000 but not wildly above expectations “should help slightly calm fears of a Fed policy mistake, as it’d demonstrate a strong economy but not one that warrants a dramatic acceleration of tapering,” wrote Tom Essaye, founder of Sevens Report Research a day ahead of the report.
“Tapering” means the Fed is gradually lowering the amount in bonds it is buying per month to zero. Fed Chair Jerome Powell had said recently that the central bank will watch the incoming economic data to decide if it will increase the pace of tapering.
At first glance, this jobs report makes that faster tapering look less likely. That would also mean the Fed would be likely to be slightly more patient with interest rate hikes, which making markets less afraid of a notable slowdown in economic growth.
But that wasn’t the story in the market Friday as signs of underlying strength in the labor market emerged.
The bond market was first to signal that the jobs report was indeed fairly strong. Bond yields across the board—long-dated and short-term—rose. The 2-year Treasury yield returned to its 2021 high of 0.64%.
Actually, “the underlying [jobs] trend here is still pretty strong,” said Scott Brown, chief economist at Raymond James. “The headline payroll number is going to whip around from month to month.” Brown cited that the 3-month moving average of private sector job gains is now 429,000, showing that over a more sustained period, the labor market is strengthening.
Plus, wages grew 0.3%. “If this continues to inch higher, it will keep core inflation higher than the Fed target and add to pressure on the Fed to act sooner on tapering,” wrote Anu Gaggar, global investment strategist for Commonwealth Financial Network.
Overall, the stock market looks wary. All three major U.S. indexes are below their all-time highs and beneath their 50-day moving averages, signifying that investors aren’t yet confident enough to price stocks as high as their recent trends. Markets will hear from the Fed many more times before any interest rate hikes.
Overseas, Tokyo’s Nikkei 225 rose 1% and the pan-European Stoxx 600 was 0.6% lower.
Here are four stocks on the move Friday:
DocuSign (ticker: DOCU) had lost more than a third of its market value, down 40%, after the e-signature software company posted earnings Thursday that showed signs of Covid-era growth slowing.
Shares in infrastructure chip maker Marvell Technology (MRVL) shot up 17% after the company posted better-than-expected earnings and outlook.
Ulta Beauty (ULTA) stock gained 1.3% after the company reported a profit of $3.93 a share, beating estimates of $2.46 a share, on sales of $2 billion, above expectations for $1.9 billion. The company also boosted sales guidance.
Fastly (FSLY) stock gained 1.4% after the company reported a loss of 11 cents a share, narrower than estimates for a 19 cent loss, on sales of $87 million, above expectations for $84 million.
Write to Jacob Sonenshine at [email protected] and Jack Denton at [email protected]
