Aug 4 (Reuters) – Wall Street stocks fell on Friday, while the U.S. dollar and Treasury yields were lower, after a government jobs report showed a slowing but still tight U.S. labor market.
Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department said in its closely watched employment report, slightly below expectations of 200,000 jobs. At the same time, the unemployment rate fell to 3.5% from 3.6% in June.
“This is still not the picture of the labor market we would expect to see if the economy were in danger of decelerating dramatically in the short term, although without question there are signs of moderation,” Rick Rieder, BlackRock’s chief investment officer of Global Fixed Income, said in a statement.
Rieder added that the moderation in hiring allows the U.S. Federal Reserve and other central banks to “utilize time as the primary tool” and hold rates “at restrictive levels for longer.”
The Dow Jones Industrial Average (.DJI) fell about 0.4% and the S&P 500 (.SPX) slipped 0.5%, reversing gains earlier in the day.
The technology-heavy Nasdaq Composite (.IXIC) was down about 0.4%, propped up by a 8% surge by Amazon.com (AMZN.O), which reported sales growth and profit that beat analyst estimates. Apple (AAPL.O) forecast a sales slump to continue into the current quarter; its shares finished down nearly 5%.
European stock indexes held their gains, with the STOXX 600 up 0.3% on the day (.STOXX) and London’s FTSE 100 (.FTSE) about 0.5% higher.
The MSCI All-World index (.MIWD00000PUS) ticked 0.1% lower on the day, down 2.6% in August thanks in part to a surge in government bond yields this week after more data pointed to slowing inflation and the prospect of a deluge of U.S. Treasury supply.
Economists who have long been forecasting a downturn by the fourth quarter of this year are increasingly becoming convinced that the “soft-landing” scenario for the economy envisaged by the Fed is now possible.
Randy Frederick, managing director of trading and derivatives at Charles Schwab in Austin, Texas, said the mixed jobs report “plays into the soft landing, or the no-landing, narrative that the markets have been slowly trudging higher on.”
“This ought to relieve some of that concern about the fact that the economy is too strong, which would cause concern that perhaps we get another rate hike in September,” Frederick added.
Data also showed the number of Americans filing new claims for unemployment benefit rose slightly last week, while layoffs dropped to an 11-month low in July as labour market conditions remained tight.
The dollar fell 0.4% against a basket of major currencies , a reversal after two consecutive weekly gains.
It has made the most headway against some of this year’s better-performing currencies, including the pound , under pressure since the Bank of England delivered a smaller rate rise than many had hoped for. Sterling was last up 0.26% on the day, still down about 0.7% in August.
China’s yuan ticked up 0.1% after an official said the central bank would use policy tools flexibly to ensure reasonably ample liquidity in the banking system.
Investors have been hoping policymakers will deliver more broad-based stimulus to boost the post-pandemic recovery as the world’s second-largest economy struggles with weak demand at home and abroad.
U.S. Treasury yields dropped after the jobs data, but investors hesitated to rule out further monetary tightening.
The yield on 10-year Treasury notes was down 14.3 basis points to 4.046%. 30-year yields were down 9.7 basis points to 4.207%.
Rating agency Fitch this week surprised markets by stripping the U.S. of its prized triple-A credit rating and cited the country’s deteriorating fiscal position as one of the key drivers, thrusting the government’s finances into the spotlight.
Earlier in the week, the U.S. Treasury said it expects to borrow just over $1 trillion in the third quarter alone, $273 billion more than its May estimate.
Oil prices rose more than a dollar a barrel, posting a sixth consecutive week of gains, after top producers Saudi Arabia and Russia extended supply cuts through September, adding to undersupply concerns.
Brent rose 1.3%, to settle at $86.24 a barrel, while the U.S. crude ended 1.6% higher at $82.82.
Reporting by Lawrence Delevingne in Boston and Amanda Cooper and Elizabeth Howcroft in London; Additional reporting by Ankur Banerjee and Sruthi Shankar; Editing by Diane Craft and Marguerita Choy
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