By Yasin Ebrahim
Investing.com — The Dow on Friday ended the week in red on fears a stronger-than-expected monthly jobs could embolden the Federal Reserve to continue on its rate hike path.
The Dow Jones Industrial Average slipped 1.7%, or 349 points, the Nasdaq fell 2.5% and the S&P 500 fell 1.7%.
The U.S. economy created 390,000 jobs in May, beating economists’ forecast for 325,000 jobs, though this was below an upwardly revised 436,000 job gains in the prior month.
The unemployment rate was unchanged at 3.6%, while wage growth, which many believe will play a key role in determining whether elevated inflation becomes entrenched, slowed.
But nonsupervisory wage growth “accelerated,” signaling that more dollars will be heading to consumers at the lower end of the scale who are more likely to spend, “making it harder for the Fed to reduce demand,” Jefferies said in a note.
While the markets appear to have mostly priced in three 50 basis point Fed rate hikes – for June, July and September – quantitative tightening remains an unknown that together with expectations for inflation to persist will keep volatility front and center.
“The market will continue to be volatile moving forward, driven by the transition from quantitative easing to quantitative tightening and expectations that inflation hasn’t peaked,” David Wagner, portfolio manager at Aptus Capital Advisors told Investing.com in an interview on Friday.
Treasury yields lost some steam but remained in the ascendency, keeping sectors of the market sensitive to rate hikes, such as tech, under pressure.
Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Meta Platforms (NASDAQ:FB), and Amazon (NASDAQ:AMZN) were in the red.
Chip stocks also piled the pressure on tech stocks following a slump in Micron (NASDAQ:MU) after Piper Sandler downgraded the company to underweight from neutral, citing pricing pressures and softer demand.
Tesla Inc (NASDAQ:TSLA), down 9%, was the biggest drag on consumer stocks after chief executive Elon Musk reportedly said the company needs to cut 10% of staff, citing a “super bad” feeling about the economy.
Musk’s gloomy outlook on the economy comes just days after JPMorgan chief executive Jamie Dimon said the bank was bracing for an economic “hurricane.”
Coinbase (NASDAQ:COIN) also flagged worries about the macroeconomic backdrop after the cryptocurrency exchange extended a hiring pause and said it would rescind some accepted job offers.
CrowdStrike (NASDAQ:CRWD) fell more than 7% even as it raised full-year guidance and reported first quarter results that beat on both the top and bottom lines.
Airlines, which have racked up gains recently on bets of a summer boom for travel demand, were also in the firing line after American Airlines Group (NASDAQ:AAL) forecast capacity toward the lower end of guidance, citing a lack of staff.
Delta Air Lines (NYSE:DAL) and United Airlines (NASDAQ:UAL) were down about 3%.