Wall Street retreats after employment figures

PARIS (Reuters) – The New York Stock Exchange gave ground at the start of the session on Friday after the publication of the monthly report on employment in the United States, which shows fewer job creations than expected but a drop in the rate of unemployment and a sharp rise in wages, which reinforces the scenario of an imminent rate hike by the Federal Reserve.

A few minutes after the start of trading, the Dow Jones index lost 40.64 points, or 0.11%, to 36,195.83, the Standard & Poor’s 500 fell 0.07% to 4,692.9 and the Nasdaq Composite gave way 0.04% to 15,074.80.

The US economy only created 199,000 non-farm jobs in December when the Reuters consensus predicted 400,000, but the unemployment rate fell to 3.9% and the average hourly wage rose 0.6% from to November.

Fed funds rate futures, reflecting investors’ expectations for the Fed’s monetary policy development, now reflect a 90% probability of a Fed funds rate hike in March.

These expectations had already weighed on the stock market trend after the publication on Wednesday of the minutes of the Fed’s December meeting showing that the rate hike could start faster than previously expected.

The December figures “continue to reflect inflationary pressures in a tight labor market,” said Michael Arone, director of investment strategy at State Street Global Advisors. “The jobs report once again underlines that the Fed will have to tackle inflation amidst the stress in the labor market.”

In the bond market, the yield on ten-year Treasuries is up nearly two basis points after employment figures at 1.7443% and the two-year hit its highest level since March 2020 at 0.908%.

On the equities side, technology stocks are once again penalized by the prospect of a rise in the cost of credit: their benchmark S&P index fell 0.22%, Microsoft 0.21% and Tesla 0.18%.

On the rise, financials profit on the contrary from the anticipated rise in rates, which should boost the margins of the sector: JP Morgan Chase gains 0.41%, Goldman Sachs 0.29%.

(Written by Marc Angrand)

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