U.S. stocks fell sharply Friday, but still were on pace to snap a 3-week losing streak, after September jobs data showed an unexpected fall in the unemployment rate that’s anticipated to reinforce the Federal Reserve’s resolve to keep tightening monetary policy. Investors also weighing a profit warning at a leading microchip maker.
The Dow Jones Industrial Average
fell 650 points, or 2.2%, to 29,273, near the session low of 29,238.49.
The S&P 500
dropped 104 points, or 2.8%, to 3,639.
The Nasdaq Composite
shed 410 points, or 3.7%, to 10,663.
Stocks were on track for back-to-back losses, trimming weekly gains, but still on pace for their best weekly gains in about a month, according to Dow Jones Market Data. Read: Will the stock market be open on Columbus Day?What’s driving markets Stocks slumped after the Labor Department said the U.S. economy added 263,000 jobs in September, while the unemployment rate declined to 3.5% from an August reading of 3.7%. Average hourly earnings rose 0.3%. “It’s a reflection that people have re-entered the mindset that the Fed is going to be raising rates at a rapid clip, probably for longer than what they might have suspected at the start of the week,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth Management, by phone. Pavlik expects the Fed to keep tightening financial conditions to try to head off inflation. “But once we turn the corner, and the economy slows down, the Fed probably will be more aggressive in cutting rates on the way down.” The data underlined the labor market’s role in the inflation battle, said Steve Rick, chief economist at CUNA Mutual Group, in a note. “If unemployment remains low, employers will increase wages to attract talent, creating more disposable income. Increased purchasing power will then lead to increased demand for goods and services, spiking prices and potentially causing the Fed to raise rates even more.” In addition, the Fed has been “draining liquidity from the system at a remarkable pace,” wrote Rick Rieder, BlackRock’s chief investment officer of global fixed income, in a Friday client note, while pointing to an astounding $1.3 trillion decline in the central bank’s balance sheet since the December 2021 peak. Pavlik at Dakota Wealth said he anticipates the Fed will start slowing interest rate hikes by mid-next year, which likely means continued pressure for the stock market, particularly with a backdrop of big oil-price
gains this week after global crude producers voted to cut monthly producti …