8-7-2023 (NEW YORK) U.S. stocks closed lower on Friday following the release of new data revealing a slowdown in job creation and ongoing wage pressures throughout June.
The Dow Jones Industrial Average experienced a decline of 187.38 points, or 0.55 percent, closing at 33,734.88. The S&P 500 also saw a decrease of 12.64 points, or 0.29 percent, finishing at 4,398.95. Likewise, the Nasdaq Composite Index dropped 18.33 points, or 0.13 percent, settling at 13,660.72.
Out of the 11 primary sectors of the S&P 500, six ended the day in negative territory. Consumer staples and health sectors were the main laggards, experiencing losses of 1.34 percent and 1.16 percent, respectively. On the other hand, energy and materials sectors led the gainers, rising by 2.06 percent and 0.88 percent, respectively.
Despite an initial surge, U.S. stocks relinquished their gains as investors digested the latest jobs data.
According to the closely watched June jobs report by the U.S. Bureau of Labor Statistics, nonfarm payrolls increased by 209,000 jobs last month, falling short of market expectations of 240,000 jobs. This marks the smallest gain since December 2020. However, the unemployment rate in June slightly declined to 3.6 percent from May’s 3.7 percent, remaining historically low.
While the June job growth figures were lackluster, the report indicated a persistent wage growth, pointing to a tight labor market and raising concerns of potential rate hikes later this year.
The U.S. Bureau of Labor Statistics revealed that average hourly earnings rose by 0.4 percent in June and 4.4 percent compared to the previous year, exceeding expectations and reflecting strong wage growth.
“It’s kind of a mixed picture today,” commented Keith Lerner, Co-Chief Investment Officer at Truist, in an interview with CNBC. “It’s good news that the economy is not falling apart; it’s still chugging along. But you still have these wage pressures that are going to keep the Fed likely to raise rates at the end of the month.”
The U.S. economy remains resilient, making it difficult for core inflation to swiftly return to the targeted 2 percent, placing pressure on the Federal Reserve to continue raising rates throughout the year, potentially extending them for longer than initially anticipated. Despite the cooling job growth and recent decline in job openings, Friday’s employment report showcased wage growth, indicating that households are still in a relatively stable position, according to Seb Vismara, global macro economist and strategist at BNY Mellon Investment Management, in an interview with MarketWatch.
Data from the CME FedWatch Tool on Friday afternoon suggests that the Federal Open Market Committee has approximately a 92 percent probability of increasing the benchmark interest rate by another 25 basis points at its July meeting.
