US stocks fell sharply on Friday after a closely watched labour market report pointed to persistently strong jobs growth in the world’s largest economy.
The S&P 500 was down 2.2 per cent by midday in New York, after data showed that US employers added 263,000 new jobs in September, down from 315,000 in August but above the figure of 250,000 anticipated by economists polled by Reuters.
The Nasdaq Composite, which is stacked full of technology shares that are more sensitive to changes in interest rate expectations, fell 3 per cent.
Friday’s report from the US Bureau of Labor Statistics also showed that the rate of unemployment had dropped unexpectedly to 3.5 per cent, from 3.7 per cent a month earlier.
Investors have scrutinised jobs data in recent months for clues about the future direction of US monetary policy. The temperature of the labour market is seen as a key influence on decision-making by the Federal Reserve, with signs of robustness typically fuelling expectations that the central bank will continue with aggressive interest rate rises.
Futures markets were on Friday pricing in the probability of the Fed raising interest rates by 0.75 percentage points in November, which would mark the fourth consecutive increase of such magnitude. The central bank’s current target range stands at 3 to 3.25 per cent.
“Today’s job number is a hawkish reading, with almost all the elements of the report moving in the wrong direction for the Fed,” said Seema Shah, chief global strategist at Principal Global Investors.
“Payrolls were broadly in line with expectations but, importantly in this good news is bad news, period: markets were hoping for a downside surprise today. Instead, the number only confirms that the Fed needs to hike rates by a fourth consecutive 0.75 per cent in November.”
Average US hourly earnings increased 0.3 per cent month on month, Friday’s figures showed — in line with the previous month, and with economists’ forecasts.
Advanced Micro Devices was among the biggest fallers on the Nasdaq on Friday, with its shares losing more than 10 per cent after the US chipmaker cut its third-quarter revenue estimate on Thursday by about $1.1bn from its previous forecast. Shares in other semiconductor groups also fell, with Qualcomm down more than 2 per cent and Nvidia down more than 6 per cent.
Europe’s regional Stoxx 600 share gauge closed down 1.2 per cent.
In government bond markets, the yield on the 10-year US Treasury note added 0.03 percentage points to 3.85 per cent. The 10-year UK yield rose 0.07 percentage points to 4.23 per cent. Bond yields rise as their prices fall.
“It’s too early to expect a pivot at the Fed level,” said Gergely Majoros, a member of the investment committee at Carmignac, ahead of the release of Friday’s data. “The bar is so high. We’d need a labour market that’s weaker, inflation coming down, some stress in the market or some sort of accident. We’re not there yet.”
The dollar advanced 0.1 per cent against a basket of six peers on Friday. The pound slipped 0.2 per cent against the greenback to $1.137, following declines in the two previous sessions. The currency remains well above the record low of $1.035 it fell to at the start of last week, after UK chancellor Kwasi Kwarteng unveiled his “mini” Budget on September 23.
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