Stocks slid on Friday as investors digested hotter-than-expected jobs data, worrying investors looking for signals the Federal Reserve may be beginning to slow rate hikes.
The Dow Jones Industrial Average fell 224 points, or 0.7%. The S&P 500 lost 0.8% as all 11 sectors traded lower, led by a 1.4% decline in information technology. The Nasdaq Composite lost 1%.
The S&P 500 and Nasdaq are on track for modest weekly gains, while the Dow is headed for a small loss.
Nonfarm payrolls rose 263,000 in November, a larger increase than the 200,000 increase expected by economists polled by Dow Jones. The unemployment rate remained stable at 3.7%.
Treasury yields soared while stocks tumbled as investors digested the data, which was closely watched as labor was seen as a relatively stubborn sector of the economy. Investors were hoping for a number that was both low enough to signal that the labor market was cooling in response to past rate hikes and high enough to indicate that the US might be avoiding a recession.
“Labor supply remains low, labor demand remains high,” said Michael Arone, chief investment strategist at State Street Global Advisors. “That means wage inflation will remain stubborn, and that’s a problem for stocks going forward because it’s likely to keep the Fed hawkish rather than dovish.”
This is the last monthly payrolls report ahead of the Fed’s two-day December 13-14 meeting, when the central bank is expected to hike its Fed funds target rate by half a percentage point. A 50 basis point hike would mean a 75 basis point slowdown from the 75 basis point rate hikes previously set by the central bank.
Fed Chair Jerome Powell appeared to confirm slower rate hikes on the horizon in a speech on Wednesday, noting that a pullback could begin as early as December.
Stocks rallied in response to Powell’s comments on Wednesday, with the Dow crossing over 700 points. But the Dow closed nearly 195 points lower on Thursday as traders tried to reduce exposure ahead of the jobs data release. The S&P 500 fell 0.09% on Thursday, while the tech-heavy Nasdaq Composite gained 0.13%.