HONG KONG – Stocks are drifting Friday as Wall Street weighs how to read a report showing the U.S. job market isn’t slowing as much as expected.
The S&P 500 was 0.1% lower in early trading and potentially on track for its first losing week in the last six. The Dow Jones Industrial Average was down 26 points, or 0.1%, as of 9:40 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Yields rose in the bond market following the report, which said U.S. employers added more jobs than economists expected last month. Workers’ wages also rose more than expected, and the unemployment rate unexpectedly improved.
The strong data keep at bay worries about a possible recession, at least for a while longer, and stocks of some companies whose profits are closely tied to the strength of the economy were rising. Energy stocks had the biggest gains in the S&P 500 as oil prices rose amid hopes for more demand for fuel.
Carrier Global jumped 5.1% for one of the market’s biggest gains after it said it agreed to sell its security business, Global Access Solutions, to Honeywell for $4.95 billion.
But the worry on Wall Street is that the remarkably resilient job market could also end up giving inflation more fuel. That could push the Federal Reserve to either raise its main interest rate further or at least keep it at its highest level since 2001 for longer than expected.
That in turn could dilute the central hope that’s helped stocks rally recently to their best levels since March 2022: Inflation has come down enough since peaking two summers ago for the Fed to finally halt its hikes to interest rates and begin cutting them next year.
“The Fed is so afraid of ‘giving up before the job is done’ that it will err on the side of overdoing it,” said Brian Jacobsen, chief economist at Annex Wealth Management.
The yield on the 10-year Treasury rose to 4.21% following the report from 4.15% late Thursday. It had been on a general decline and relaxing the pressure on stocks since topping 5% in October and reaching its highest level since 2007.
The yield on the two-year Treasury, which more closely follows expectations for the Fed, rose to 4.69% from 4.60% as traders pulled back on bets for how many times the Fed could cut rates in 2024.
High rates and yields hurt all kinds of investments, and they pack a particularly hard punch on stocks seen as the most expensive or requiring their investors to wait a long time for big growth.
Google’s parent company, Alphabet, fell 1.3% and was the heaviest weight on the S&P 500. A day earlier, it had soared amid excitement about the launch of its latest artificial-intelligence offering.
Friday’s jobs report is one of the last major pieces of data the Fed will get before it announces its next move on interest rates Wednesday. The next comes on Tuesday, when the U.S. government gives the latest monthly update on how high inflation is for U.S. consumers.
The widespread expectation is still for the Fed to hold its main interest rate steady next week, according to data from CME Group. But traders are now betting on only a 47.5% chance the Fed will have cut rates by May. That’s down from nearly 65% a day earlier.
In the oil market, crude prices rose to recover some of their sharp losses in recent months. A barrel of benchmark U.S. oil gained 1.9% to $70.68, though it’s still well below its price above $93 in September. It’s been tumbling on worries that demand from the global economy won’t be strong enough to absorb all the world’s available supplies.
Brent crude, the international standard, rose 1.8% to $75.41 per barrel.
In stock markets abroad, indexes were mostly higher in Europe and mixed in Asia. The Nikkei 225 dropped 1.7% for a second straight tumble amid speculation about whether the Bank of Japan will ease off its ultra-easy policy on interest rates.
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AP Business Writer Zimo Zhong contributed.
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