By Christine Idzelis and Mark DeCambre
U.S. stock indexes ended lower Friday, but still booked weekly gains, with technology stocks under pressure as bond yields rose after a monthly report on the labor market came in much weaker than expected.
However, the jobs report seems unlikely to delay Federal Reserve plans to announce a reduction of its bond purchases as the economy recovers from the pandemic.
How did major stock indexes trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.39% fell 8.69 points, or less than 0.1%, to close at 34,746.25.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.06% slipped 8.42 points, or 0.2%, to end at 4,391.34.
The tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.69% lost 74.48 points, or 0.5%, to finish at 14,579.54.
On Thursday , the Dow /zigman2/quotes/210598065/realtime DJIA +1.39% rose 338 points, or 0.98%, to 34,755, the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.06% increased 36 points, or 0.83%, to 4,400, and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.69% gained 152 points, or 1.05%, to 14,654.
For the week, the Dow gained 1.2%, its largest percent gain since June 25, according to Dow Jones Market Data. The S&P 500 rose 0.8% and the Nasdaq gained 0.1%.
What drove the market?
Stocks wavered in bumpy trade Friday, as investors struggled to coalesce around a clear theme for markets after labor data showed the U.S. economy created far fewer jobs than had been expected in September.
The question now is whether employment gains are sufficient to keep the Federal Reserve on track to scale back monetary policy stimulus. A rise in Treasury yields suggests that fixed-income participants anticipate that September’s headline figures won’t derail the central bank’s plans of starting to unwind its easy money policies before the end of the year.
Nonfarm payrolls rose by just 194,000 in the month , compared with the Dow Jones estimate of 500,000, the Labor Department reported Friday. However, the unemployment rate fell to 4.8%, versus expectations for 5.1%, and August’s report was raised 366,000 from 235,000.
Tony Roth, chief investment officer of Wilmington Trust, told MarketWatch Friday that he sees “very little” in the jobs report that changes “the Fed’s need to start to taper” this year. The job market is “going in the right direction,” with the unemployment rate dropping, while the rise in wages adds to some investors’ concerns that elevated inflation may not be temporary, Roth said by phone.
“Looking behind the curtains, the details point to tighter labor conditions than the headline data suggests,” wrote Charlie Ripley, senior investment strategist at Allianz Investment Management, in emailed comments. “With wages increasing to 4.6% on an annualized basis and the unemployment rate dropping to 4.8% it appears that labor conditions are fairly tight given the current amount of job openings in the economy.”
The miss on jobs is tied to the supply of workers, creating a “confusing” dynamic for the market as it’s hard to know how permanent labor shortages may be as the economy continues its recovery from the pandemic, according to Roth. The Fed needs to complete tapering before it begins raising interest rates, with rate hikes being a tool to keep inflation from getting out of control, he said.
The spread this summer of the coronavirus delta variant likely discouraged job seekers in September, despite many companies being desperate to hire, economists and business leaders say.