US stocks fell sharply on Friday, giving up all the gains they made from a post-jobs report rally ahead of the Labor Day weekend.
The S&P 500 fell 1.1%, while the Dow Jones Industrial Average fell by the same margin, or about 340 points. The high-tech Nasdaq posted the largest slice of the major averages, capping the session with a 1.3% drop.
The losses came after a rally earlier in the day indicating some investor optimism that a modest 0.50% increase in interest rate could come from the Federal Reserve later this month after the August jobs report showed Job growth slowed last monthas expected.
Data from the Ministry of Labor Published Friday morning showed Nonfarm payrolls grew by 315,000 in August while the unemployment rate rose to 3.7%.
Economists had expected job gains to total 298,000 with the unemployment rate expected to remain at 3.5%.
Wage gains eased somewhat last month, with average hourly earnings up 0.3% month over month and 5.2% from a year earlier. Both readings were 0.1% below expectations.
However, the highlight of Friday’s jobs data was the increase in participation, with 786,000 Americans entering the workforce last month and pushing the workforce participation rate to 62.4%, the highest level since March 2020.
Investors were focused on Friday’s data after Federal Reserve Chairman Jerome Powell emphasized in a hawkish speech at a Jackson Hole symposium last week that Willing to accept weaker working conditions in exchange for cooler prices.
“The slower pace of August payroll gains, combined with a significant recovery in the workforce, and a more modest increase in wages appear to favor a 50 basis point rate hike from the Fed next month, rather than a 75 basis point increase, but Officials will put more weight on August CPI data, which is due out the following week, Michael Pierce, chief US economist at Capital Economics, wrote in a note on Friday.
In addition to the stock market rally, the dollar was weakening on Friday - which is positive for risky assets - while Treasury yields moderated after a sharp rally earlier this week. The 10-year yield held near 3.21% in late morning trade, down from highs around 3.27% earlier this week.
Lululemon shares (lulu) closed up 6.7% after the sports apparel retailer reported its quarterly earnings on Thursday Wall Street estimates topped. The company also raised its annual earnings and revenue guidance above analyst expectations as wealthy customers snapped up its new offerings of accessories.
from Broadcom (AVGO) Stocks also rose on Friday following a strong sales forecast by the chip maker for the current quarter, allaying fears of a slump in chip demand.
While some better-than-fear financial data this season helped support sentiment, several strategists have recently sounded the alarm about impending earnings weakness.
According to Morgan Stanley’s Mike Wilson, while the first half of the year is dictated by Federal Reserve policy and tighter fiscal terms, the second half will be determined by earnings forecasts for next year.
“As a result, equity investors should focus on these risks, not the Fed, especially as we enter the weakest seasonal time of the year to review earnings, and inflation is eroding further into margins and demand,” Wilson said.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed
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