U.S. stocks fell on Friday and ended the week lower as investors took in a key report on the state of the labor market's recovery, which underscored still-solid labor market conditions. Friday's losses extended steep declines from the prior session, when concerns over the Federal Reserve's ability to bring down inflation while maintaining solid economic activity resurged.
The S&P 500 dropped by 0.6% Friday to close at 4,123.67. The Nasdaq Composite dropped 1.4%, ending at 12,144.66. The Dow fell by just under 100 points to settle at 32,901.08. A day earlier, the S&P 500 shed 3.6%, while the Nasdaq dropped 5% for its worst day since June 2020. The Dow had lost more than 1,000 points.
The moves Friday morning came in the wake of the Labor Department's April jobs report, which showed a better-than-expected 428,000 non-farm payrolls returned across the U.S. economy last month. Consensus economists were looking for job gains of 380,000, according to Bloomberg consensus data. And the unemployment rate held steady from March to come in at 3.6%, or just slightly above February 2020's multi-decade low of 3.5%.
The report suggested at least the labor portion of the U.S. economy was still on strong footing even as the Federal Reserve began its process of tightening monetary policies. Stocks had swung violently from gains Wednesday to losses on Thursday, as investors appraised the implications of the Federal Reserve's latest telegraphed monetary policy path forward for the U.S. economy and markets.
"The solid 428,000 gain in non-farm payroll employment in April illustrates that the Fed was right to ignore the misleading contraction in first-quarter GDP," Paul Ashworth, chief U.S. economist for Capital Economics, wrote in a note Friday morning.
Investors have had to weigh whether the Fed's monetary policy path forward will succeed in being aggressive enough to address rising prices while still avoiding triggering a deep downturn in the economy. While investors momentarily cheered Fed Chair Jerome Powell's suggestions earlier this week that the central bank was not considering raising rates by a more drastic 75 basis points at a time, they have also had to consider whether more moderate hikes will ultimately be able to bring down inflation currently running at the hottest levels since the 1980s.
"[Wednesday], I think the markets had a sense of relief that maybe Powell took 75 basis points off the table for further rate hikes, suggesting the Fed might take a more mild path," Jeffrey Kleintop, Charles Schwab chief global investment strategist, told Yahoo Finance Live on Thursday. "But [Thursday], I think the market's recognizing that there are risks associated with that — higher inflation, maybe."
"That's certainly what we're seeing here with [Treasury] yields spiking higher. And to me, this is an enduring theme, this isn't just a one-day phenomenon," Kleintop added. "If you look all the way back to August of 2020, there's been one major theme in the markets, and that is short-duration stocks, meaning low price to cash flow, have been outperforming longer-duration stocks, or high price to cash flow ... and that is a trend that's going to continue here."
Treasury yields on the long end of the curve rose further, and the benchmark 10-year yield rose above 3.1%. The continued march higher in Treasury yields and borrowing costs has weighed on growth and technology stocks, which are valued heavily on their future earnings potential.
And the most recent economic data including Friday's jobs report have bolstered the central bank's case that the U.S. economy remains, at least for now, strong enough to absorb some more monetary policy tightening. However, whether that ultimately continues amid even higher interest rates and the myriad of other macro concerns remains to be seen — and that uncertainty has remained a key source of investor consternation.
"The job market is very tight ... there's tons of geopolitical impacts, especially on things like energy and food, which creeps into everything else. Supply chains remain challenged, and we have now Chinese COVID shutdowns which make it even more stressed," Paul Kim, Simplify Asset Management CEO, told Yahoo Finance Live on Thursday. "Bottom line is, there's too much demand for goods and services and not enough supply. And the Fed can't solve those real-world problems, and I think that's what's solving this indigestion."
"I don't think we've hit the bottom yet, simply because we're just starting the hiking process," Kim added. "There's arguably hundreds of basis points to go."
4:01 p.m. ET: Stocks fall, ending volatile week in the red
Here were the main moves in markets as of 4:01 p.m. ET:
S&P 500 (^GSPC): -23.20 (-0.56%) to 4,123.67
Dow (^DJI): -96.89 (-0.29%) to 32,901.08
Nasdaq (^IXIC): -173.03 (-1.40%) to 12,144.66
Crude (CL=F): +$2.30 (+2.12%) to $110.56 a barrel
Gold (GC=F): +$7.80 (+0.42%) to $1,883.50 per ounce
10-year Treasury (^TNX): +5.7 bps to yield 3.1230%
1:02 p.m. ET: What economists are saying about the April jobs report
The April jobs report marked another solid print on the state of U.S. labor market, with payrolls growing by more than 400,000 for a twelfth consecutive month and the jobless rate holding near its lowest level since 1969. However, the declining labor force participation rate further solidified that labor supply challenges were lingering, putting upward pressure on wages and broader inflation.
Here's what some economists had to say about the report, based on notes and commentary sent to Yahoo Finance:
"The April employment report was mixed. On the one hand, job growth remained robust with non-farm payrolls adding 428k jobs, topping consensus expectations for a 380k increase. Wage growth was solid with average hourly earnings increasing by 0.3% mom, or 5.5% yoy [year-over-year], and March was revised up from 0.4% mom to 0.5% mom ... On the other hand, the unemployment rate held at 3.6% as employment according to the household survey, fell by 353K, and the participation rate declined by 0.2ppt [percentage points] to 62.2%. The mixed signals from today's report make it more of a push than anything else. It does not alter our monetary policy or economic outlook in any significant way." – Stephen Juneau, Bank of America U.S. economist
"The report cannot be music to the Federal Reserve’s ears as the almost record low unemployment rate means wages are going even higher, shooting out more sparks to light inflation fires across the country which keeps Fed officials pumping the brakes ... [T]he labor market has returned nearly to where it was before the pandemic, but it turned out to be a pyrrhic victory as full employment and labor shortages have opened up a virtual Pandora's box of the most dangerous inflation outbreak seen since the 70s." – Chris Rupkey, chief economist at FWDBONDS
"A further decline in the participate rate could exacerbate the labor supply shortage, resulting in further wage pressures that will inevitably flow through to broad-based inflation. The Fed will surely speed up the pace of tightening if the participation rate continues to decline amid a robust hiring backdrop." – Peter Essele, head of portfolio management for Commonwealth Financial Network
"The solid 428,000 gain in non-farm payroll employment in April illustrates that the Fed was right to ignore the misleading contraction in first-quarter GDP, with the economy still on a firm footing. Admittedly, we expect employment growth to slow this year, but fears of an imminent recession, which have been amplified by the latest bout of weakness in equities, are overblown." – Paul Ashworth, chief North America economist for Capital Economics
10:30 a.m. ET: Under Armour shares slide by 22% to pace toward biggest drop in five years as supply chain concerns weight on guidance
Under Armour (UAA) was on track for its biggest single-session slide since 2017, with supply chain challenges pressuring revenue for the current fiscal year.
The athletic-wear maker said Friday it expects revenue to rise between 5% and 7% for the current fiscal year. Last fiscal year, revenue rose 27% to reach a total of $5.7 billion.
The company's current-year forecast "includes approximately three percentage points of headwinds related to our strategic decision to work with our vendors and customers to cancel orders affected by capacity issues, supply chain delays, and emergent COVID-19 impacts in China," Under Armour said in a statement.
For Under Armour's latest reported quarterly results, revenue rose 3% to reach $1.3 billion. North American revenue, which is the company's largest geographical segment, increased 4% year-over-year. In Asia Pacific, however, sales fell 13% on a currency neutral basis, with renewed virus-related lockdowns in China weighing on results.
9:34 a.m. ET: Stocks open lower after jobs report
Here's where markets opened Friday morning:
S&P 500 (^GSPC): -33.96 (-0.82%) to 4,112.91
Dow (^DJI): -243.43 (-0.74%) to 32,754.54
Nasdaq (^IXIC): -138.38 (-1.12%) to 12,179.31
Crude (CL=F): +$1.28 (+1.18%) to $109.54 a barrel
Gold (GC=F): +$1.20 (+0.06%) to $1,876.90 per ounce
10-year Treasury (^TNX): +5.1 bps to yield 3.1170%
7:35 a.m. ET Friday: Stock futures fall as traders await jobs report
Here's where stocks were trading Friday morning:
S&P 500 futures (ES=F): -22.5 points (-0.54%) to 4,120.75
Dow futures (YM=F): -126 points (-0.38%) to 32,784.00
Nasdaq futures (NQ=F): -95.5 points (-0.74%) to 12,762.50
Crude (CL=F): +$2.08 (+1.92%) to $110.34 a barrel
Gold (GC=F): +$8.20 (+0.44%) to $1,883.90 per ounce
10-year Treasury (^TNX): +2.5 bps to yield 3.093%
6:01 p.m. ET Thursday: Stock futures open little changed
Here's where markets were trading Thursday evening:
S&P 500 futures (ES=F): unchanged 4,143.25
Dow futures (YM=F): -12 points (-0.04%) to 32,898.00
Nasdaq futures (NQ=F): +15 points (+0.12%) to 12,873.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.