U.S. Stocks Close Lower After Jobs Report

The markets are getting off to a tough start in 2022.

The S&P 500 ended the week with a loss of 1.9%, while the Dow Jones Industrial Average lost 0.3%. The tech-rich Nasdaq Composite fell 4.5%, its worst week since February. And the turmoil was not confined to the stock market: the yield on the 10-year Treasury bill surged for five consecutive sessions to its highest level since January 2020, before the pandemic began to aggressively spread to states. -United

The week was marked by strong swings in the stock and bond markets, as investors fled some of the most popular deals of the past year and analyzed signals from the Federal Reserve on the way to rate hikes. As bond prices fell and Treasury yields surged, investors abandoned stocks of tech and growth companies, especially some of the more speculative bets in those sectors.

The S&P 500 kicked off the new year with a new all-time high on Monday, but came under further pressure after the Federal Reserve minutes confirmed its intention to withdraw stimulus measures and suggested it could do so sooner and longer faster than expected, due to high inflation. The broad stock gauge and other major indexes ended the week with their worst performance in the first five trading days of the year since 2016.

On Friday, December’s jobs report was the latest of several puzzling signs of the economic recovery that investors are evaluating.

“The markets are a little scared here by the minutes and maybe a bit of what they see in the job market,” said Mona Mahajan, senior investment strategist at Edward Jones.

The jobs report showed that the United States created 199,000 jobs in December, below the 422,000 expected by economists polled by the Wall Street Journal. Yet 2021 ended with the addition of a record number of jobs by the United States. The unemployment rate fell to 3.9%.

Analysts have struggled to estimate job gains during the pandemic and the government is receiving less data from employers. Investors are also grappling with a factor they have mostly ignored over the past decade: inflation. The latest jobs report showed average hourly wages rose 4.7% in December from a year earlier, well above wage growth of around 3% before the pandemic and s adding to the historically high inflation numbers that have pissed off investors.

Adding to the uncertainty, some investors said they expected the Omicron variant to potentially hamper job gains in the coming months.

The S&P 500 slipped for the fourth consecutive session, dropping 19.02 points, or 0.4%, to 4,677.03 on Friday. The Nasdaq Composite Index lost 144.96 points, or around 1%, to 14,935.90. The Dow Jones Industrial Average lost 4.81 points, or less than 0.1%, to 36,231.66.

The Federal Reserve’s minutes, released on Wednesday, helped fuel government bond sales that continued after the monthly jobs report. Investors anticipated the possibility of early interest rate hikes and the Fed’s reduction in its bond portfolio in the near future. The benchmark 10-year Treasury bill yield was 1.769%, concluding its biggest three-week yield gain since 2019.

“Everything happening in the markets this week was about expectations about how quickly the Fed will tighten policy,” said Fahad Kamal, chief investment officer at Kleinwort Hambros. “This is a year of transition where we go from record political support to real tightening. There will be tremendous volatility as we figure out how to work within this paradigm. “

As investors fled tech stocks, many have crammed into cyclical sectors of the market, like energy and financial companies. These groups outperformed this week, posting gains as the market as a whole declined. The S&P 500 energy group gained nearly 11% this week, while the financial sector gained 5.4%.

Shares of tech heavyweights, which have been sensitive to interest rate expectations, fell this week. Alphabet shares fell about 5.4%, while Netflix fell about 10%. Shares of Cathie Wood’s flagship exchange-traded fund, ARK Innovation, fell almost 11%.

Below the surface, the sale was even more extreme. Almost 40% of Nasdaq Composite shares are down 50% from their 52-week highs, while nearly two-thirds are in bear markets, or down 20%, according to Sundial Capital Research. This shows how volatile individual stocks have been as investors positioned themselves for the next phase of the economic recovery.

In business news, GameStop stock was up 7.3%, even larger gains from the start of the session, after the Wall Street Journal reported the company planned to enter the cryptocurrency and non-fungible token markets.

Shares have been under pressure since the release of the Federal Reserve policy meeting minutes.


Photo:

BRENDAN MCDERMID / REUTERS

Oil prices have risen this week. Global benchmark Brent crude rose 5.1% to $ 81.75, ending a third straight week of gains. Oil supply could potentially be lower due to cold weather in North Dakota and Alberta, Canada, and if protests from crude producer Kazakhstan affect production, ING analysts said.

Protests first sparked by rising fuel prices in Kazakhstan have turned violent, prompting a Russian-led military coalition to send troops to the oil-rich country. The video shows government buildings and streets in several towns stormed by protesters. Photo: Mariya Gordeyeva / Reuters

Overseas, the pancontinental Stoxx Europe 600 fell 0.4%.

In Asia, the main stock market indices were mixed. The Shanghai Composite Index fell 0.2%, while the Hong Kong Hang Seng Index rose 1.8%, driven by gains in tech stocks. South Korea’s Kospi index rose 1.2%.

—Sam Goldfarb contributed to this article.

Write to Gunjan Banerji at gunjan.banerji@wsj.com and to Anna Hirtenstein at anna.hirtenstein@wsj.com

Corrections and amplifications
GameStop has joined the premarket. An earlier version of this article incorrectly referred to GameStop as GameStock. (Corrected January 7)

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