Stocks turn deficit and lose post job report gains

US stocks plunged in afternoon trading, losing all gains from the post-jobs report rally ahead of the Labor Day holiday weekend.

Nearly 1:20 PM ET, all three indices traded in the red, gaining more than 1% in the morning session.

The S&P 500 was down 0.3%, the Dow down about 0.3% and the Nasdaq lost 0.8% the most.

The market’s early rally raises optimism that the Fed could raise rates by a more gradual 0.50% later this month after August’s jobs report showed a predictable slowdown in job growth last month. He suggested a different view to some investors.

Nonfarm payrolls rose by 315,000 in August, with the unemployment rate rising to 3.7%, according to Labor Department data released Friday morning.

Economists had expected the unemployment rate to remain at 3.5% and expected job growth to total 298,000.

Wage gains eased somewhat last month, with average hourly wages rising 0.3% month-on-month and 5.2% year-on-year. He fell 0.1% below expectations on both measurements.

But the biggest highlight in Friday’s jobs data was the increase in participation, with 786,000 Americans joining the workforce last month, pushing the labor force participation rate to 62.4%, the highest since March 2020.

Fed Chairman Jerome Powell delivered a hawkish speech at a symposium in Jackson Hole last week, claiming he was willing to accept lower working conditions in exchange for lower prices. The family turned their attention to Friday’s data.

“A slowdown in wage growth in August, a sharp recovery in the labor force, and modest increases in wages seem to favor a modest 50bp rate hike by the Fed over next month’s 75bp hike. , officials will pay more attention to the August consumer price index, which is released the week after next,” Michael Pearce, senior U.S. economist at Capital Economics, wrote in a note on Friday.

In addition to the stock market rally, Friday’s weaker dollar was positive for risk assets and Treasury yields moderated after a sharp rise earlier this week. The 10-year yield reached nearly 3.21% in morning trading, down from a high of about 3.27% reached earlier this week.

NEW YORK, NY - SEPTEMBER 1: Traders take to the floor of the New York Stock Exchange (NYSE) in New York City on September 1, 2022. Sept 1 as investors looked forward to Friday's hiring report Stocks rose in late afternoon trading.  (Photo by Spencer Pratt/Getty Images)

Traders are at work on the floor of the New York Stock Exchange (NYSE) in New York City on September 1, 2022. Stocks were higher in late afternoon trading on Sept. 1 as investors looked forward to Friday’s jobs report. (Photo by Spencer Pratt/Getty Images)

Lululemon (LULU) shares rose more than 11% in early trading after the athletic apparel retailer reported quarterly earnings that beat Wall Street estimates. The company also raised its full-year earnings and earnings guidance to beat analyst forecasts as wealthy customers buy new accessory products. In afternoon trading, Lululemon shares were up nearly 7%.

Shares of Broadcom (AVGO) also rose Friday morning, alleviating fears of a recession-induced decline in semiconductor demand as the chipmaker announced strong sales forecasts for the quarter.

While some financial conditions this season have been better than feared and helped boost sentiment, many strategists have recently warned of impending weakness in earnings.

Morgan Stanley’s Mike Wilson said the first half of the year was driven by Federal Reserve policy and tightening fiscal conditions, while the second half will be driven by next year’s earnings projections.

“As a result, equity investors should focus on this risk rather than the Fed, especially as we enter our weakest season due to earnings revisions and inflation further eroding margins and demand. ‘ said Wilson.

Alexandra Semenova is a reporter at Yahoo Finance. follow her on her twitter @alexandraandnyc

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