Stock market today: Wall Street sinks after good news on the economy raises worries about inflation
Stock market today: Wall Street sinks after good news on the economy raises worries about inflation
NEW YORK (AP) — U.S. stocks are sinking on worries that Friday’s good news on the job market may be too good and prove to be bad for Wall Street by keeping inflation and interest rates high.
The S&P 500 was down 0.8% in early trading and on track for its fourth losing week in the last five. The Dow Jones Industrial Average was down 267 points, or 0.6%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 1.1% lower.
Stocks took their cue from the bond market, where yields leaped to crank up the pressure after a report from the Labor Department said U.S. employers added many more jobs to their payrolls last month than economists expected.
Such strength in hiring is of course good news for workers looking for jobs. But it could also keep upward pressure on inflation by maintaining the overall economy at a solid level. That in turn could dissuade the Federal Reserve from delivering the cuts to interest rates that Wall Street loves. Lower rates can not only goose the economy but also boost prices for investments.
The Fed has already indicated it’s likely to ease rates fewer times this year than it earlier expected because of worries about higher inflation. That’s in part because some officials are taking seriously the possibility of tariffs and other policies coming from President-elect Donald Trump that could worsen inflation.
To be sure, economists and analysts said Friday’s jobs report may not be quite as strong as it seems on the surface. The overall number of hires during the month blew past expectations, but “manufacturing is still getting crushed” with job losses, said Brian Jacobsen, chief economist at Annex Wealth Management.
“The macroeconomy may be fine,” he said, “but each individual’s microeconomy could look very different.”
The average raises that workers are getting can also be a more important data point for the Fed, and it was below 4% last month. That’s “a data point the Fed wants to see,” according to Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren.
Still, traders had largely been banking on a stream of coming cuts when they sent U.S. stock indexes to dozens of records last year. Fewer cuts would likely mean stock prices either have to fall or profits at companies would have to rise more strongly to make up for it.
Delta Air Lines was able to rise 8.6% Friday, for example, because it delivered a stronger profit report for the last three months of 2024 than analysts expected. The airline said it’s seeing strong demand for travel, which accelerated through the end of last year, and it expects that to continue into 2025.
Most of Wall Street went the other direction.
Stocks that are seen as the most expensive can feel the most pressure from higher yields, which means bonds are paying investors more in interest to sit in something that’s supposed to be much safer than stocks. That pulls the lens toward Nvidia and other Big Tech stocks whose prices have soared in the frenzy around artificial-intelligence technology.
Nvidia slumped 3.4% and was the heaviest weight on the market.
Insurance companies were also under pressure as wildfires continue to burn in the Los Angeles area. Many of the homes that have been destroyed have been in expensive areas where the typical price is more than $3 million. Such high-price damage could eat into insurers’ profit. Allstate fell 3%, and Chubb lost 1.9%.
In the bond market, the yield on the 10-year Treasury rose to 4.75% from 4.69% shortly before the release of the jobs report. It was below 3.65% in September.
The yield on the two-year Treasury, which moves more closely with expectations for near-term Fed action, climbed to 4.33% from 4.28% shortly before the jobs report. Traders see it as a near certainty that the Fed will not cut interest rates at its next meeting toward the end of this month, which would be the first time it’s done so following three straight cuts.
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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
By STAN CHOE
AP Business Writer
