Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Wall Street dives, oil surges as investors prepare for more rate hikes

Published 07/10/2022, 03:05
Updated 07/10/2022, 21:45
© Reuters. FILE PHOTO: People walk past a screen displaying the Hang Seng stock index outside Hong Kong Exchanges, in Hong Kong, China July 19, 2022. REUTERS/Lam Yik

© Reuters. FILE PHOTO: People walk past a screen displaying the Hang Seng stock index outside Hong Kong Exchanges, in Hong Kong, China July 19, 2022. REUTERS/Lam Yik

By Pete Schroeder

WASHINGTON (Reuters) -U.S. stocks tumbled on Friday after a stronger-than-expected jobs report locked in expectations that the Federal Reserve is sticking with a steady diet of rate hikes, while supply cuts continued to boost oil prices.

The Dow Jones Industrial Average closed down more than 600 points, sliding 2.11%, while the S&P 500 fell 2.8% and the Nasdaq Composite lopped off 3.8% in value as investors bet that the Fed's inflation fight will continue apace.

The MSCI world equity index, which tracks shares in 45 nations, was down 2.45%.

The U.S. Labor Department reported that nonfarm payrolls increased by 263,000 in September - slightly above expectations - with the jobless rate dipping to 3.5%, below forecasts.

The data solidified the view that the Fed and other global central banks have a way to go before easing up on their tightening cycles, after stocks surged earlier in the week on hopes that such a pivot may be on the way.

"Today's employment data did little to change the narrative for a Fed committee that has been intensely focused on bringing down inflation," said Charlie Ripley, senior investment strategist for Allianz (ETR:ALVG) Investment Management. "Timing the Fed's pivot away from an aggressive policy stance is proving to be difficult, and the current conditions in the labor market are certainly not helping the situation."

The likelihood of ongoing interest rate increases helped drive up the dollar and Treasury yields yet again. {{2126|The dodollar index, which tracks the greenback versus a basket of six currencies, was up 0.47%, and the yield on benchmark 10-year Treasury notes climbed 5.9 basis points to 3.881%.

Markets are currently pricing in a 92% chance of a 75-basis-point increase for next month's Federal Open Market Committee meeting.

Investors will now turn to quarterly corporate earnings kicking off next week, as well as Thursday's latest monthly figures on U.S. inflation.

"The market's negative reaction may be a sign that investors are processing the likelihood that there will be no change in the Fed's aggressive playbook in the near term," said Mike Loewengart, head of model portfolio construction at Morgan Stanley (NYSE:MS)'s global investment office. "Keep in mind the next Fed decision isn't until early November, so much more data will need to be digested, not least of which is next week's inflation gauge."

Crude oil continued to ride the announced supply cuts from OPEC+ to a five-week high, shaking off concerns of an economic slowdown.

© Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 7, 2022. REUTERS/Brendan McDermid

Brent crude closed up 3.7% to $97.91 a barrel and U.S. crude prices were up 4.73% at $92.63 a barrel. [O/R]

Elsewhere, gold took a hit against the surging dollar, with spot prices falling 0.9% to $1,695.52 an ounce.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.