Stock market indices sold off on Friday after the July nonfarm payrolls report beat expectations by a country mile. Weak guidance of PC components from the hard drive manufacturer Western Digital (WDC) contributed to the pressure on technology stocks, with widespread names posting significant losses.
The Dow Jones Industrial Average was down 0.3% just after lunch, while the S&P 500 fell 0.6%. The Russell 2000 small cap index is resisting the downward flow, gaining 0.3%. The Nasdaq composite lost 0.9%.
Nasdaq volume is down 9% from Thursday, while the NYSE was near yesterday’s imprint.
Overview US stock market today
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Last update: 12:30 ET 5/8/2022
Bonds were sold across all maturities, increasing the yield on 10-year government bonds to 2.87%. Crude oil bounced back sharply as gold sold off, pushing the yellow metal down nearly 1% to $1,789. The inflation-prone copper rose 1.8% to $3.54.
Western Digital (WDC) is trading 5.7% lower after warning that hard drive sales are falling at an accelerated pace, compared to pre-pandemic levels. Intel (INTC) and other PC components were also sold in the news.
Chip stocks also traded lower, while the threat of Taiwanese supply disruptions fueled concerns about inflation and hardware sales.
Commercial banks rebounded after the jobs report despite benchmark losses, hoping that steady demand and rising interest rates will drive bigger gains. Dow component JPMorgan Chase (JPM) rose nearly 3% while the SPDR S&P Bank ETF (KBE) was up 0.5%.
Employment in July rises above modest expectations
Half a dozen Fed governors warned stock market participants this week about a 2022 version of Alan Greenspan’s “irrational exuberance.” The comments made perfect sense after nonfarm payrolls wiped out expectations that 250,000 jobs would be added. Instead, nonfarm payrolls came in at 528,000. A hot job market is fueling consumer demand and wages, which invariably translates into higher inflation.
Hourly wages surpassed the monthly consensus of 0.3% and rose 5.2% year-over-year. Bond yields shot higher on the news amid concerns that much higher interest rates will be needed to contain inflationary pressures.
Chairman Jerome Powell made it clear last week that demand must contract to bring inflation back to historic levels. If that doesn’t happen, the Fed will have little choice but to be more aggressive on interest rates.
The probability of a 75 basis point rate hike in September rose to 65.5%, from 34% a day earlier. Fed fund rates are now expected to peak at 3.6% in April 2023, a dramatic increase since last week’s post-Fed print of 3.06%.
Stock Market Highlights on Friday
Synopsys (SNPS), #16 on the IBD 50, rose within 2% of the 377.70 buy point of a seven-month double bottom. The stock has a bullish 98 Composite Rating and 97 EPS Rating.
The company has beaten quarterly estimates by double digits for the past three quarters, while annual earnings per share have risen for six years in a row. See if that bullish streak continues into 2023 and 2024, with expected growth of 24% and 14% EPS, respectively.
Adtalem Global Education (ATGE), #48 on the IBD 50, broke through and fell below the 21-day exponential moving average as the stock fell 3.5%.
AMN Healthcare (AMN), #39 on the IBD 50, rose nearly 7% after reporting a 102% increase in earnings per share. The stock forms a cup-with-handle pattern with a 125.04 buy point, although the handle is deeper than normal.
The stock is trading 7% below the pivot after Friday’s bullish gain.
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