Wall Street Slips On Too-Hot Job Market

NEW YORK (AP) -- Worries about a too-hot job market are sending Wall Street lower Friday, keeping stocks on track to close out a fifth straight losing week.

The S&P 500 was down 0.3% in morning trading and heading for its longest weekly losing streak in 16 months. The Dow Jones Industrial Average was down 117 points, or 0.4%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.1% lower.

Once again, it was rising yields in the bond market pushing stocks lower. Yields leaped after a report said U.S. employers added nearly twice as many jobs last month as economists expected.

Trading could be shaky through the day, though, as Friday's jobs report also included some more encouraging nuggets for the inflation fighters at the Federal Reserve. Stocks pared their losses as the morning progressed.

Strength in the job market is normally a good sign for financial markets because it means the economy is doing well and corporate profits can too. But in this new normal of high inflation, Wall Street worries too much strength will push companies to keep raising prices for their products. That upward pressure on inflation could in turn force the Federal Reserve to keep interest rates high for a longer time than expected.

Wall Street hates high interest rates because they knock down prices for all kinds of investments. And even though the job market hasn't faltered yet, despite the Fed pulling its main interest rate to the highest level since 2001, high rates work to extinguish high inflation by slowing the entire economy. That raises the risk of a recession in the long term, even if a strong economy supports corporate profits in the near term.

"The blow-out jobs report is maybe not so good news for markets," said Seema Shah, chief global strategist at Principal Asset Management.

"Markets want the perfect landing," she said about the possibility of an economy that's slowing just enough to undercut high inflation but not so much that it causes a painful recession, "and instead they are facing an upward sloping path."

Treasury yields soared following the jobs report. The yield on the 10-year Treasury jumped to 4.82% from 4.72% late Thursday and again is near its highest level since 2007.

Shorter-term yields were swinging, though, as economists pointed to some more encouraging data within the jobs report. The two-year Treasury yield more closely tracks expectations for action by the Fed, and it quickly soared from 5.04% just before the release of the jobs report to 5.20% shortly afterward. It then pared its gain to 5.05%.

Among the potentially encouraging signals for the Fed: Workers' average wages rose at a slower rate in September than economists expected. While that's discouraging for workers trying to keep up with inflation, it could remove some inclination by companies to raise their prices.

The Fed should be focusing on such moderate wage gains, rather than the growth in jobs, said Brian Jacobsen, chief economist at Annex Wealth Management.

"The labor market isn't overheating, it's still healing," he said.

Average hourly earnings rose at the slowest rate, on a year-over-year basis, since June 2021.

"Like most reports, Fed will find things to like and dislike here," according to Andrew Patterson, senior economist at Vanguard.

That raises the stakes for upcoming reports next week on inflation at both the consumer and wholesale levels. They're the next huge data points coming before the Fed makes its next announcement on interest rates on Nov. 1.

Worries about high interest rates sent the majority of stocks on Wall Street lower, including Levi Strauss.

The denim maker's stock fell 1.2% even though it reported slightly stronger profit for the latest quarter than analysts expected. Its revenue fell short of expectations, and it said it expects earnings for its full fiscal year to fall at the low end of its forecasted range.

Next week will see the unofficial start to earnings reporting season for the S&P 500, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group among the big companies scheduled on the calendar.

Utility stocks in the S&P 500 fell 1.6% as a group for one of the sharpest losses among the 11 sectors that make up the index. Because they pay relatively high dividends and their businesses are generally steadier than the rest of stock market, utility stocks see some of their investors abandon them when bonds are paying more competitive yields.

Stocks of oil-and-gas producers were also sinking Friday, including a 1.8% drop for Chevron.

They've been dropping as prices for crude oil have pulled back sharply over the last week. A barrel of benchmark U.S. crude was unchanged at $82.31, while Brent crude, the international standard, slipped 0.5% to $83.67.

The drop for oil prices from above $93 per barrel last week has offered some relief on the inflation front, after crude had charged higher from $70 in the summer.

In stock markets abroad, indexes were mostly higher across much of Europe and Asia. Japan's Nikkei 225 was an outlier and slipped 0.3%.