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(Bloomberg) – Stocks fell after a rally that pushed the market to multiple records this year as traders weighed mixed jobs data.
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The S&P 500’s gains were erased by a downturn in its most influential group, technology. The consolidation warnings surfaced after the benchmark gauge rose 35% since early last year. The tech-heavy Nasdaq 100 fell 1%. Nvidia ended a six-day rally, Tesla extended its decline to 13% this week, and Broadcom suffered soft chip sales.
“The issue again is that we are seeing overbought/extended conditions at many levels and a significant disconnect between price action and momentum,” said Dan Wantrowski of Janney Montgomery Scott. Stated. “This creates great vulnerability to a backlash in the coming weeks and months.”
Never miss an episode. Follow the Big Take Podcast on iHeart, Apple Podcasts, Spotify, and wherever you go. Read the transcript.
Friday’s report showed the economy continues to add jobs without causing a spike in wages that could disrupt the disinflationary process. The numbers reignited hopes that the Fed can achieve a soft landing that would allow officials to begin easing policies by the end of the year, but without risking too soon.
“While the report wasn’t necessarily a ‘perfect’ signal for the Fed, it also doesn’t seem to have anything that could derail its rate cut plans,” said Chris Larkin of E*Trade. Morgan Stanley.
The yield on the two-year Treasury note fell 1 basis point to 4.49%, with traders almost fully pricing in a quarter-point rate cut by the Federal Reserve in June. The dollar recorded its longest losing streak since October. Gold hit new highs. Bitcoin at one point reached $70,000.
The U.S. unemployment rate rose to a two-year high in February even as employment remained healthy, showing that the labor market is cooling but resilient.
Nonfarm payrolls rose by 275,000 last month, after being revised downward by a total of 167,000 in the previous two months. The unemployment rate rose to 3.9% and wage growth slowed.
“This employment report is probably the best the market can hope for at the moment,” said Florian Hierpo of Lombard Odier Asset Management. This number is consistent with the idea of an economy that is “not too hot, not too cold, and has some kind of sweet spot for the market.”
The report was deemed “haphazard” by Principal Asset Management’s Seema Shah and several other market observers. Nevertheless, Shah sees the broad numbers as somewhat positive for the market.
“If the economy can continue to add jobs without triggering a recovery in wage growth, the Fed will achieve a soft landing,” he said.
In other words, the report confirms that the labor market is strong but not overheated, meaning the Fed is on track to cut interest rates this year, says Sonu Varghese of Carson Group. he says.
“The labor force is doing well and wage inflation is turning around, so the Fed is taking a stab at that dual mandate,” said Jamie Cox of Harris Financial Group. “No one expected this outcome, but it is happening.”
Mohamed El-Erian, president of Queen’s College, Cambridge, said investors were treating the U.S. jobs report as “good news” even though it was mixed and provided few hard signals for policymakers. That’s what it means.
“I think the bottom line for policymakers and most economists is that this doesn’t contain much new information,” El-Erian told Bloomberg TV. However, the current mindset among investors is that “good news is good news. Good news is good news.” “Bad news is good news,” he said.
Swap contracts predicting the Fed’s decision have been repriced to lower interest rate levels, suggesting traders expect the Fed to ease by nearly 100 basis points by the end of the year. Last month, those contracts temporarily priced in less than 75 basis points of easing this year, down from more than 150 basis points seen in early 2024.
For Gina Bolvin of Bolvin Wealth Management Group, the biggest takeaway from Friday’s numbers was the fact that the unemployment rate is increasing. She is among those who predict that if the unemployment rate reaches 4%, the Fed will be concerned and will be more likely to cut interest rates in June.
Charles Hepworth of GAM Investments said: “If you really think unemployment has bottomed out and is trending upwards and wage growth is slowing, then clearly the door is wide open for rate cuts. It will become.”
Federal Reserve Chairman Jerome Powell testified before lawmakers this week that he believes the labor market is “on the cusp of improving the balance between supply and demand.” He also suggested the central bank was nearing the confidence it needed to start cutting rates.
Ian Lingen of BMO Capital Markets said the weak wage statistics were noteworthy.
“At the very least, this latest update on wage inflation reflects Powell’s message that the first cuts are on the way.”
Company highlights:
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A United Airlines Holdings Inc. plane ran off a taxiway into grassland after landing in Houston on Friday, marking the third high-profile incident this week involving the company’s Boeing aircraft.
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Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan Semiconductor Manufacturing Co., Ltd.) plans to secure more than $5 billion in federal grants to support semiconductor manufacturing projects in Arizona, officials said, in an effort to boost U.S. semiconductor manufacturing. This marks a major milestone in President Joe Biden’s efforts to
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Eli Lilly’s Alzheimer’s drug donanemab faces further delays in gaining approval in the U.S., with regulators planning to hold hearings with outside advisers to examine the treatment’s safety and effectiveness. ing.
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Gap Inc. reported better-than-expected fourth-quarter profits, showing that efforts to turn around the storied apparel retailer are bearing fruit.
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Huawei and its partner Semiconductor Manufacturing International Inc. relied on U.S. technology to produce advanced chips in China last year, according to people familiar with the matter.
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Novo Nordisk A/S says the price of its blockbuster weight loss drug Wegoby will fall as more patients will be able to get the treatment through their insurance companies and health systems, paving the way for broader use. said CEO Lars Fluergaard Jorgensen.
The main movements in the market are:
stock
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As of 12:56 p.m. New York time, the S&P 500 was down 0.4%.
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Nasdaq 100 fell 1.2%
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The Dow Jones Industrial Average is little changed.
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MSCI World Index falls 0.1%
currency
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The Bloomberg Dollar Spot Index fell 0.2%.
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The euro was almost unchanged at $1.0939.
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The British pound rose 0.3% to $1.2847.
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The Japanese yen rose 0.6% to 147.10 yen to the dollar.
cryptocurrency
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Bitcoin rises 2.2% to $68,847.63
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Ether rose 2.2% to $3,960.01
bond
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The 10-year government bond yield was almost unchanged at 4.08%.
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Germany’s 10-year bond yield fell 4 basis points to 2.27%.
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UK 10-year bond yields fell 2 basis points to 3.98%.
merchandise
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West Texas Intermediate crude oil fell 1.1% to $78.04 a barrel.
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Spot gold rose 1.1% to $2,183.02 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Felice Marantz, Liz Capo McCormick, and Elizabeth Stanton.
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