Stocks fell on Friday as investors believe a stronger-than-expected jobs report will likely keep the Federal Reserve on track for its aggressive rate hikes.
The S&P 500 fell 0.7%, while the tech-heavy Nasdaq Composite dropped 1.1%. The Dow Jones Industrial Average shed 129 points, or about 0.4%.
Nonfarm payrolls increased 372,000 in the month of June, better than the 250,000 Dow Jones estimate and continuing what has been a strong year for job growth, according to data Friday from the Bureau of Labor Statistics.
“The overall picture is pretty strong job growth, and I’d say quite good earnings growth. That just makes the case for 75 basis points this month almost air tight,” said Michael Schumacher, head of macro strategy at Wells Fargo.
Treasury yields jumped sharply after the jobs data was released, which may have weighed on stocks. Tech and other high-growth sectors are sensitive to rising rates, as that can devalue future earnings.
Shares of Netflix and Match.com fell more than 2%, and Chinese internet retail giant JD.com lost more than 3%.
Though the jobs report was a positive sign for the state of the U.S., many investors believe that will allow the Federal Reserve to aggressively fight inflation with rate hikes in the coming months.
“This report is good news is bad news for the market today…you couldn’t ask for anything better from this jobs report in terms of broad gains, low unemployment, the number was above expectations,” said Michael Arone of State Street Global Advisors. “Wages were growing but at a slower rate. …That was a good thing, and yet the markets kind of shrugged their shoulders here because at the end, the conclusion is the Fed is going to go by 75 basis points.”
Defensive-oriented consumer staples stocks were among the outperformers, with PepsiCo and Costco holding on to slight gains.
Friday’s market action follows a winning session Thursday, in which the S&P 500 notched a four-day positive streak to match its longest of the year thus far. The index is now down about 19% from its all-time high in January.
Entering Friday, the S&P 500 was up about 2% during this holiday-shortened week, and it’s on pace for its second positive week in the last three.
The Dow Jones Industrial Average and the tech-heavy Nasdaq Composite were up 0.92% and 4.4% this week, respectively, as of Thursday’s close. Both indexes are also on track for their second positive week in the last three.
Elsewhere on Friday, shares of Levi Strauss gained more than 3% after the retailer reported quarterly earnings that exceeded expectations and boosted its dividend.
GameStop fell about 6% as the company fired its chief financial officer and said it would lay off employees as part of a turnaround plan. The stock notched a 15% gain in the prior session after the video game retailer announced a 4-for-1 stock split.
Shares of WD-40 fell more than 12% after the company reported shrinking margins during its fiscal third quarter, citing macroeconomic pressures.
The second-quarter earnings season begins in earnest next week, with reports due out from most major banks.