Major Averages Finish Volatile Session Mixed After Strong Jobs Data

After moving sharply lower early in the session, stocks saw substantial volatility over the course of the trading day on Friday. The major averages showed wild swings as the day progressed before eventually closing mixed for the second straight day.

While the Dow rose 76.65 points or 0.2 percent to 32,803.47 after tumbling by more than 200 points in early trading, the Nasdaq fell 63.03 points or 0.5 percent to 12,657.55 and the S&P 500 dipped 6.75 points or 0.2 percent to 4,145.19.

For the week, the Nasdaq surged by 2.2 percent and the S&P 500 climbed by 0.4 percent, while the narrower Dow edged down by 0.1 percent.

The volatility on Wall Street came as traders reacted to the Labor Department’s closely watched monthly jobs report.

The report showed employment in the U.S. jumped by much more than expected in the month of July, leading to concerns about the outlook for interest rates.

The report showed non-farm payroll employment spiked by 528,000 jobs in July after surging by an upwardly revised 398,000 jobs in June.

Economists had expected employment to climb by about 250,000 jobs compared to the addition of 372,000 jobs originally reported for the previous month.

With the stronger than expected job growth, the unemployment rate unexpectedly edged down to 3.5 percent July from 3.6 percent in June. The unemployment rate was expected to remain unchanged.

While the data paints a positive picture of the labor market, the report may also give the Federal Reserve confidence they can continue aggressively raising interest rates without causing a recession.

“The unexpected acceleration in non-farm payroll growth in July, together with the further decline in the unemployment rate and the renewed pick-up in wage pressure, make a mockery of claims that the economy is on the brink of recession,” said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, “This raises the odds of another 75bp rate hike in September, although the outcome depends more on the evolution of the next couple of CPI reports.”

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Oil-related stocks saw significant strength, however, regaining some ground following recent weakness. The rebound came as crude oil for September delivery rose $0.47 to $89.01 a barrel after falling to the lowest levels since Russia’s invasion of Ukraine.

Reflecting the strength in the sector, the NYSE Arca Oil Index and the Philadelphia Oil Service Index surged by 2.2 percent and 2.1 percent, respectively.

Considerable strength was also visible among steel stocks, as reflected by the 2 jump by the NYSE Arca Steel Index.

Natural gas and banking stocks also saw notable strength on the day, while tobacco and semiconductor stocks moved to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index advanced by 0.9 percent, while China’s Shanghai Composite Index jumped by 1.2 percent.

Meanwhile, the major European markets moved to the downside on the day. While the U.K.’s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index and the German DAX Index fell by 0.6 percent and 0.7 percent, respectively.

In the bond market, treasuries moved sharply lower following the stronger than expected jobs data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, surged 16.4 basis points to 2.840 percent.

Looking Ahead

Next week’s trading is likely to be impacted by reaction to the latest readings on U.S. inflation, which could affect the outlook for interest rates.

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