U.S. stocks closed lower on Friday after a mixed report on the labor market in June raised uncertainty about the pace of the economic recovery and the outlook for interest rates.
The Labor Department said that employers added 213,000 jobs in June, below the consensus estimate of 230,000 and the smallest gain since December 2020. However, the unemployment rate fell to 5.9%, the lowest level since March 2020, and average hourly earnings rose 3.6% from a year ago, indicating steady wage growth.
Some analysts said that the report was not strong enough to prompt the Federal Reserve to tighten its monetary policy sooner than expected, while others said that the low unemployment rate and rising wages could increase inflationary pressures and force the Fed to act sooner.
The Fed has said that it will start reducing its $120 billion monthly bond purchases when it sees “substantial further progress” toward its goals of maximum employment and stable inflation. It has also signaled that it expects to raise its benchmark interest rate twice by the end of 2023.
The uncertainty about the Fed’s policy path weighed on investor sentiment and led to a decline in most sectors of the stock market. The S&P 500 index fell 0.8% to 4,352.34, snapping a seven-day winning streak. The Dow Jones Industrial Average dropped 0.9% to 34,786.35, while the Nasdaq Composite slid 0.8% to 14,639.33.
Among the worst performers were energy stocks, which fell 2.4% as oil prices retreated from their highest levels since 2018. Occidental Petroleum Corp. (OXY) plunged 7.4% after announcing a $2 billion stock offering to reduce its debt. Financial stocks also fell 1.5% as bond yields declined, reducing the profitability of lending. JPMorgan Chase & Co. (JPM) fell 1.6% despite announcing a dividend increase after passing the Fed’s stress test.
On the positive side, technology stocks outperformed the broader market, as lower interest rates tend to benefit growth-oriented companies with high valuations. Apple Inc. (AAPL) rose 2% and became the first U.S. company to reach a $3 trillion market capitalization. Meta Platforms Inc. (FB) gained 1.3% after announcing a $50 billion share buyback program.
Looking ahead, investors will be watching for the minutes of the Fed’s June meeting, which will be released next week and could provide more clues on the central bank’s thinking and plans regarding monetary policy.
