US equities were firmly up on Friday, but down for the week as traders assessed the monthly employment data which did little to counter the likelihood of a more aggressive monetary tightening and weighed on talks that the China could loosen COVID restrictions.
The S&P 500 (^ GSPC) advanced 1.4%, while the Dow Jones Industrial Average (^ DJI) jumped more than 400 points, or about 1.3%. The technology-centric Nasdaq Composite (^ IXIC) posted a gain of about the same magnitude. However, all three major averages fell for the week. The Dow finished for the first time in five weeks.
The US economy added 261,000 jobs in October, while the September reading was revised up to 315,000 from the previously reported 263,000, the Labor Department said Friday. Economists had expected salaries to rise by 195,000 last month, according to consensus estimates compiled by Bloomberg. The unemployment rate rose to 3.7%.
“Today’s stronger-than-expected report illustrates the difficult task still ahead of the Fed as it struggles with a resilient labor market and sticky inflation,” said Mike Loewengart, head of model portfolio construction at the Global Investment Office. by Morgan Stanley, in the comments sent by email. “While the number may be disappointing for investors hoping for a dovish Fed sooner rather than later, keep in mind that it was the lowest reading in nearly two years, so there may be signs of a market slowdown.”
Investors have been betting that some signs of a job market cooling would force the Federal Reserve to scale back its aggressive rate hike campaign, but President Jerome Powell said Wednesday that mild moderations in the data weren’t enough for a break in the rates. increases, with work still historically rigid conditions.
“Although job vacancies have fallen below their highs and the pace of job gains has slowed since the start of the year, the labor market continues to be unbalanced, with demand substantially exceeding the supply of available workers, “Powell said Wednesday after the US central bank made a fourth consecutive hike in interest rates by 75 basis points.
In the third quarter of this year, payroll earnings averaged 372,000 per month. Weekly jobless claims, the earliest snapshot of the U.S. job market, were also consistently low, with a reading this week at 217,000.
“Initial claims are not picking up a bit,” DataTrek’s Nicholas Colas said in a statement. “Put simply, there is still no sign that neither the Fed’s aggressive monetary policy nor the tighter financial conditions it has brought about are still hitting US labor markets.”
Central banks around the world have moved hand in hand with the US Federal Reserve to proceed on a combative path of monetary tightening, raising concerns about the impact of synchronized rate hikes. The Bank of England raised interest rates by 75 basis points on Thursday, while European Central Bank President Christine Lagarde said in recent remarks that rates may need to be hiked to restrictive levels to bring inflation back to target. 2%.
While monetary policy caught the attention of investors this week, corporate earnings continued to plummet. Shares of Block (SQ) were up 11% after the company significantly beat estimates on the strong performance of its Cash App and Square payment offerings.
Payments peer PayPal (PYPL), meanwhile, saw shares drop nearly 2% after the company slashed its revenue forecast to 8.5% from its previous 18% forecast, despite having beaten earnings results.
Shares of Twilio (TWLO) plunged 35% after the cloud communications company lost gains and reported weaker-than-expected driving.
Shares of Toymaker Funko (FNKO) plummeted nearly 60% after the company reported a large profit loss and slashed its annual forecast before the holiday season.
Meanwhile, Alibaba (BABA) shares gained 7% along with a large rally in Chinese equities due to speculation that the country will end its strict zero-COVID policy.
Alexandra Semenova is a Yahoo Finance journalist. Follow her on Twitter @alexandraandnyc
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