By Christine Idzelis and Mark DeCambre
U.S. stock benchmarks ended lower Friday, relinquishing solid opening gains and notching another week of losses, as investors reassessed a weaker-than-expected November jobs report as unlikely to stay the hand of a Federal Reserve that seems intent on tamping down inflation.
How did stock benchmarks trade?
The Dow Jones Industrial Average DJIA fell 59.71 points, or 0.2%, to close at 34,580.08, after hitting 34,801.31 near the open.
The S&P 500 index (S&P:SPX) slipped 38.67 points, or 0.8%, to end at 4,538.43, after setting an intraday peak at 4,608.03.
The Nasdaq Composite Index (NASDAQ:COMP) shed 295.85 points, or 1.9%, to finish at 15,085.47, near the 100-day moving average at 15,082.44, according to FactSet.
On Thursday , the Dow industrials rose 617.75 points, or 1.8%, to 34,639.79 — the best percentage gain since March 5, 2021 and the best point gain since Nov. 9, 2020. The S&P 500 index closed up 1.4% to 4,577.10, its best day since Oct. 14. The Nasdaq Composite added 0.8% to 15,381.32. The small-cap oriented Russell 2000 index (USA:RUT) gained 2.7% Thursday to finish at 2,206.33, a day after hitting its first correction since June 2020.
For the week, all three major indexes booked losses, with the Dow falling 0.9%, the S&P 500 sliding 1.2% and the Nasdaq dropping 2.6%. That Dow notched a fourth straight week of losses, while the S&P 500 and Nasdaq each closed with weekly declines for the second week in a row.
The Russell 2000 index saw a weekly decline of 3.9%.
What drove the markets?
Markets ended lower as a report from the Labor Department showed that a mere 210,000 new jobs were created in the U.S. in November, well below estimates from economists polled by The Wall Street Journal for a gain of 573,000 new jobs. However, there were enough perceived positives in the numbers that it reignited concerns of an aggressive pace of tightening of financial conditions by the Federal Reserve.
“I don’t think there was much in this report that was going to derail plans for a faster taper timeline” that the Federal Reserve appears set to consider for slowing its asset purchases, or rate hikes “happening much sooner than investors had expected just three months ago” as the economy continues to recover in the pandemic, said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management, in a phone interview Friday.
While the headline number of the jobs report Friday “wasn’t terrific ” some “favorable trends” in the data showed an increase in labor-force participation, which the Fed probably views as a “win” under its goal of maximum employment, according to Heppenstall. He said the markets are likely in for more volatility as the Fed shifts away from giving priority to accommodation in the economic recovery and focuses more on inflation.
Fed Chair Jerome Powell’s remarks Tuesday about potentially speeding up the central bank’s tapering process amid high inflation, along with uncertainty surrounding the impact of the new omicron variant of the coronavirus, have been the main source of uneasiness in the market this week.
“We had substantial volatility almost every day this week,” said Tom Mantione, managing director within UBS Private Wealth Management in Stamford, Conn., in a phone interview Friday. “You’re at an inflection point in Fed policy,” he said.
The lackluster headline number in Friday’s job report came despite businesses taking more aggressive steps to hire people, and may highlight challenges faced by the labor market in the recovery from the pandemic, particularly as the spread of the omicron variant takes shape.
As for the bright spots in the jobs report , some 594,000 people rejoined the labor force in November, with the so-called rate of participation edging up to 61.8%. The jobless rate fell to 4.2% from 4.6%, touching a new pandemic low.
“While disappointing on the headline number, the rest of the report was much better and this may help explain why stocks are rolling over,” wrote Michael Hewson, chief market analyst at CMC Markets UK, in a daily note.
Investors are scrutinizing the jobs report, because if the Fed deems it a positive, the central bank could speed up interest-rate hikes and deliver a hit to rate-sensitive, growth-oriented stocks in the technology sector.
“Markets have a lot to digest as the economy is strong, but the labor market is reaching its full potential and inflationary forces are already elevated, which is why the Fed is feeling more urgency to complete their tapering early and may need to raise interest rates more quickly than many people are expecting,” wrote Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
The market also has harbored lingering concerns that tech valuations were too lofty, which, perhaps, are highlighted by the precipitous decline in shares of DocuSign DOCU , down 42.2% Friday after the electronic-signature company billings and revenue forecast missed expectations and its chief executive said the pandemic boom had worn off in the quarter.
In other economic reports Friday, the final November reading of IHS Markit’s purchasing managers index geared to the service sector was 58 versus an initial reading of 57. The more closely watched services reading from the Institute for Supply Management rose to 69.1 in November from 66.7, above forecasts. A reading of 50 or better indicates improving conditions. U.S. factory orders were up by 1% in October.
In U.S. politics, Congress’s passage late Thursday of a short-term extension of government funding, through Feb. 18., averts a partial shutdown after resolving a standoff over vaccine rules. On Friday, President Joe Biden signed the bill into law to keep the federal government running.
Which companies were in focus?
U.S. listed shares of Chinese companies fell into focus on Friday, after Chinese ride-hailing giant Didi Global DIDI said late Thursday it will delist from the New York Stock Exchange , following pressure from the Chinese government. Shares of Didi plunged 22.2% Friday.
Shares of Marvell Technology (NAS:MRVL) shares surged 17.7% after the chip maker’s results and outlook topped Wall Street forecasts .
How did other assets trade?
The yield on the 10-year Treasury note BX:TMUBMUSD10Y fell Friday more than 10 basis points to 1.342%. The yield fell 14.2 basis points this week for its largest weekly decline since June 2020, according to Dow Jones Market Data. Prices for Treasurys fall as yields rise.
The ICE U.S. Dollar Index DXY , a measure of the currency against a half-dozen other monetary units, was little changed.
Gold futures (NYM:GC00) for February delivery rose 1.2% to settle at $1,783.90 an ounce. For the week, gold prices based on the most-active contract traded nearly 0.1% lower, according to Dow Jones Market Data.
The Stoxx Europe 600 Index (STOXX:XX:SXXP) closed 0.6% lower Friday for a weekly decline of 0.3%. London’s FTSE 100 Index (FTSE:UK:UKX) slipped 0.1% but remained up 1.1% for the week.
In Asia, the Shanghai Composite Index (SHG:CN:SHCOMP) closed 0.9% higher Friday for a weekly gain of 1.2%, while the Hang Seng Index (HONG:HK:HSI) closed 0.1% lower in Hong Kong, bringing its decline for the week to 1.3%. Japan’s Nikkei 225 Index (NIKKEI:JP:NIK) closed 1% higher Friday but still slid 2.5% for the week.
—Barbara Kollmeyer contributed to this article.