(Bloomberg) — U.S. Treasuries fell and stocks struggled for direction after a better-than-expected U.S. jobs report increased bets of tighter monetary policy, eroding some bullish sentiment from Amazon.com Inc. earnings.
The S&P 500 was little changed while the Nasdaq 100 added 0.5% with Amazon up 13% on a price hike for Prime memberships. Meanwhile, Europe’s Stoxx 600 declined as rate-hike bets reduced risk appetite. The dollar rose.
U.S. employers added more jobs than forecast last month, despite a surge in Covid-19 infections and related business closures. U.S. payrolls came in higher than all economists expected at 467,000 — a three-month high — while average hourly earnings also rose a higher-than-expected 0.7% month over month.
The report is likely to increase conviction in the Federal Reserve’s path forward.
“A strong jobs report, along with elevated inflationary economic data that we’ve seen recently, could boost expectations that we’ll see a 50-basis point rate increase at the March meeting,” said Brian Price, head of investment management for Commonwealth Financial Network. “I still believe that 25 basis points is the base case at this point but 50 is not off the table either.”
It’s been a volatile week in markets as investors were jolted by weak numbers at U.S. tech giants including Facebook-owner Meta Platforms Inc., which wiped more than $250 billion from its market value on Thursday. However, positive earnings from Amazon helped lift sentiment, with the online marketplace and tech company adding more than $150 billion to its market cap.
“It seems like each day we wake up to, ‘Thank you sir, may I have another?’ as a few tech blowups drag down the overall market,” said Mike Bailey, director of research at FBB Capital Partners. “There is an interesting behavioral metric where one bad thing requires four to five good things to make up for it.”
Here’s what else Wall Street saying Friday:
“Hopefully now that the week is coming to a close, we’re seeing that the economy is still strong based on this jobs report, that people can take a breath and really reassess what is the economic environment that we’re going into in the year ahead.” — Lindsey Bell, chief markets and money strategist at Ally
“The January employment report was strong overall, informs us that businesses are willing to look through the Omicron shock (which is actually news), and reinforces the case for the Fed tightening.” — Gerard MacDonell, analyst at 22V Research
“It was always going to be a surprise as far as the payrolls report was concerned, given the range of outcomes. And we got a positive surprise … The Fed is further and further behind and they’re going to have to catch up.” — Anastasia Amoroso, chief investment strategist at iCapital
“The data reinforces the case for hikes and QT and I think the 10-year should rise more, especially real rates. With the 10-year getting close to 2%, I worry about mortgage-backed securities convexity hedging and more bond fund outflows.” — Priya Misra, global head of rates strategy at TD Securities
“A better-than-expected jobs report only fuels the Fed’s fire to raise rates, and act quickly. While they’ve already signaled that the labor market is in a good place, there was potential for omicron to derail that progress — and that just doesn’t seem to be the case. So with the market typically unwelcoming of news that could accelerate the pace of action from the Fed, we could see some volatility.” — Mike Loewengart, managing director of investment strategy at E*Trade
Dip buyers have hoped a stronger earnings season would keep equities attractive and counter some concerns about tighter monetary policy in the face of higher inflation. Of the 272 companies in the S&P 500 that have reported results, 82% have met or beaten estimates, with profits coming in 8.8% above projected levels.
Still, signs of stubborn price pressures continue to appear as the latest data showed U.S. gasoline prices surged to the highest in more than seven years. Crude oil extended a fresh seven-year high, with banks including Goldman Sachs Group Inc. forecasting Brent will reach $100 a barrel.
“We are getting late in the cycle. The market is becoming more selective,” wrote Wells Fargo’s Chris Harvey. “The tide will no longer lift all boats and the market will become less and less forgiving in our view. Going forward, we feel investors will need to cut loses quickly and to focus on margins rather than the top or bottom line.”
Hawkish comments from European Central Bank President Christine Lagarde and a Bank of England interest-rate hike underlined risks from inflation. While a selloff in the region’s bonds eased Friday, the mood in the stock market turned sour. Europe’s Stoxx 600 fell 1.4% as rate-hike bets reduced risk appetite. Makers of cars and parts were the worst-performing industry group, while gains for technology shares surrendered gains.
Elsewhere, an Asia-Pacific equity gauge pushed higher partly on a 3% jump in Hong Kong where markets reopened from a holiday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 12:07 p.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 1.4%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro rose 0.2% to $1.1458
- The British pound fell 0.4% to $1.3542
- The Japanese yen fell 0.2% to 115.19 per dollar
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 1.91%
- Germany’s 10-year yield advanced six basis points to 0.21%
- Britain’s 10-year yield advanced four basis points to 1.41%
Commodities
- West Texas Intermediate crude rose 2.3% to $92.39 a barrel
- Gold futures rose 0.3% to $1,808.80 an ounce
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