UNITED STATES NEWS

Stocks lose more ground on fears a recession may be looming

Oct 7, 2022, 2:06 PM | Updated: Oct 8, 2022, 2:00 pm

A man wearing a face mask is reflected on an electronic foreign currency exchange rates in downtown...

A man wearing a face mask is reflected on an electronic foreign currency exchange rates in downtown Seoul, South Korea, Friday, Oct. 7, 2022. Asian shares followed Wall Street lower Friday ahead of U.S. jobs data investors hope will persuade the Federal Reserve to ease off plans for more interest rate hikes. (AP Photo/Lee Jin-man)

(AP Photo/Lee Jin-man)

NEW YORK (AP) — Good news on the economy remains bad news for Wall Street, as stocks fell sharply Friday on worries a still-strong U.S jobs market may actually make a recession more likely.

The S&P 500 ended 2.8% lower after briefly dropping 3.3% as traders weighed a government report showing employers hired more workers last month than economists expected. The Dow Jones Industrial Average fell 2.1% and the Nasdaq composite lost 3.8%.

Wall Street is worried the Federal Reserve could see that as proof the economy has yet to slow enough to get inflation under control. That could clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely.

“The employment situation is still good and that might be a little frustrating to the Fed,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “The Fed thinks we need more people unemployed in order to make sure inflation comes down and stays down.”

Stocks have tumbled over 20% from records this year on worries about inflation, interest rates and the possibility of a recession.

The major indexes managed to notch a gain for the week, thanks to a powerful but short-lived rally Monday and Tuesday after some investors squinted hard enough at some weaker-than-expected economic data to suggest the Fed may take it easier on rate hikes. But Friday’s jobs report may have dashed such hopes for a “pivot” by the Fed. It’s a pattern that has been repeated several times this year.

“For for a lot of this a year, there really has been a degree of false optimism among many investors that the Fed would would tap the brakes and pivot sooner than they’ve been telling us they will for quite some time,” Bill Merz, head of capital market research at U.S. Bank Wealth Management.

“The market is increasingly coming to terms with, albeit gradually, that the Fed is highly unlikely to pivot in the near-term as some have been hoping for.”

Employers added 263,000 jobs last month. That’s a slowdown from the hiring pace of 315,000 in July, but it’s still more than the 250,000 that economists expected.

Also discouraging for investors was that the unemployment rate improved partly for the wrong reasons. Among people who aren’t working, fewer than usual are actively looking for jobs. That’s a continuation of a longstanding trend that could keep upward pressure on wages and inflation.

“We are not out of the woods yet, but should be getting closer as the impact of aggressive policy starts to take hold,” said Matt Peron, director of research at Janus Henderson Investors.

By hiking interest rates, the Fed is hoping to slow the economy and jobs market. The plan is to starve inflation of the purchases needed to keep prices rising even further. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. The risk is that if the Fed goes too far, it could squeeze the economy into a recession. In the meantime, higher rates push down on prices for stocks, cryptocurrencies and other investments.

“Everything hinges on inflation at this point,” said Peter Essele, head of portfolio management for Commonwealth Financial Network. “We do think its going to moderate over the next few quarters.”

Altogether, many investors see Friday’s jobs data keeping the Fed on track to hike its overnight rate by three-quarters of a percentage point next month. It would be the fourth such increase, which is triple the usual amount, and bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.

Crude oil, meanwhile, had its biggest weekly gain since March. Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel Friday. Brent crude, the international standard, rose 3.7% to settle at $97.92.

They’ve shot higher because big oil-producing countries have pledged to cut production in order to keep prices up. That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.

The rise for crude helped stocks of oil-related companies to be among Wall Street’s very few to rise Friday. Oilfield services provider Halliburton climbed 2%.

Stocks of technology companies led the way in the opposite direction. They’ve been among the hardest hit by this year’s rising rates, which most hurt investments seen as the riskiest, most expensive or having to make investors wait the longest for big growth.

Microsoft slumped 5.1%, and Amazon fell 4.8%.

All told, more than 90% of stocks in the S&P 500 closed lower Friday. The index fell 104.86 points to 3,639.66. It ended with a 1.5% gain for the week, its first weekly gain in four weeks.

The Dow dropped 630.15 points to 29,296.79, while the Nasdaq lost 420.91 points to close at 10,652.40.

Smaller company stocks also gave up more ground. The Russell 2000 index fell 50.36 points, or 2.9%, at 1,702.15.

Beyond higher interest rates, analysts say the next hammer to hit stocks could be a potential drop in corporate profits. Companies are contending with high inflation and interest rates eating into their earnings, while the economy slows.

Advanced Micro Devices fell 13.9% after it warned revenue for its latest quarter is likely to come in at $5.6 billion, below its prior forecasted range of $6.5 billion to $6.9 billion. AMD said the market for personal computers weakened significantly during the quarter, hurting its sales.

Levi Strauss fell 11.7% after it cut its financial forecast for its fiscal year. It cited the surging value of the U.S. dollar against other currencies, which weakens the dollar value of sales made abroad, as well as a more cautious outlook on economies across North America and Europe.

Treasury yields rose immediately after the jobs report’s release, though they wobbled a bit afterward. The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, climbed to 3.88% from 3.83% late Thursday.

The two-year yield, which more closely tracks expectations for Fed action, rose to 4.30% from 4.26%. Earlier in the morning, it climbed above 4.33% and was near its highest level since 2007.

___

AP Business Writers Damian J. Troise, Joe McDonald and Matt Ott contributed. Veiga reported from Los Angeles.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

United States News

Associated Press

Masked shooters kill 4 people and injure 3 at an outdoor party in California, police say

KING CITY, Calif. (AP) — A group of men in masks opened fire at an outdoor party in central California, killing four people and injuring three others Sunday evening, police said. Police responded to a reported shooting around 6 p.m. in King City and found three men with gunshot wounds who were pronounced dead in […]

3 hours ago

FILE - This artist depiction shows Massachusetts Air National Guardsman Jack Teixeira, right, appea...

Associated Press

Pentagon leak suspect Jack Teixeira is expected to plead guilty in federal court

BOSTON (AP) — Jack Teixeira, the Massachusetts Air National Guard member accused of leaking highly classified military documents about Russia’s war in Ukraine and other national security secrets, is expected to plead guilty on Monday in federal court. The 22-year-old is due to appear in Boston’s federal courthouse for a change of plea hearing nearly […]

7 hours ago

LaFonda D, Sutton-Burke, U.S. Customs and Border Protection Director of Field Operations poses for ...

Associated Press

How Chinese retailers can offer Americans steep bargains on clothes and why that could change

WASHINGTON (AP) — As a substitute teacher in her mid-20s, Lindsey Puls was delighted to discover the fashion world of Shein more than 10 years ago, lured in by its super-low prices — with tops selling for a few dollars, dresses under $10, and free shipping on orders over $29. Puls, who has a blog […]

7 hours ago

Omar Abu Kuwaik poses for a photo at the Global Medical Relief Fund residence, Wednesday, Jan. 17, ...

Associated Press

A 4-year-old Gaza boy lost his arm – and his family. Half a world away, he’s getting a second chance

NEW YORK (AP) — Omar Abu Kuwaik is far from his home in Gaza. The 4-year-old’s parents and sister were killed by an Israeli airstrike, when he lost part of his arm. He’s one of the lucky ones. Through the efforts of family and strangers, Omar was brought out of Gaza and to the United […]

7 hours ago

Chassity Coston, left, and Charity Wallace pose outside Harvard Yard at Harvard University, Saturda...

Associated Press

Black women struggle to find their way in a job world where diversity is under attack

BOSTON (AP) — Regina Lawless hit a professional high at 40, becoming the first director of diversity and inclusion for Instagram. But after her husband died suddenly in 2021, she pondered whether she had neglected her personal life and what it means for Black woman to succeed in the corporate world. While she felt supported […]

7 hours ago

Capitol One Arena is shown before an NHL hockey game between the Washington Capitals and the New Je...

Associated Press

Two fragile DC neighborhoods hang in the balance as the Wizards and Capitals consider leaving town

WASHINGTON (AP) — Already struggling to keep his Chinatown bar afloat, Yousef Tellawi felt a sense of impending doom when he learned that the owner of Washington’s Capitals and Wizards wanted to move the teams out of the neighborhood and into northern Virginia. The departure of the teams from their home at Capital One Arena, […]

7 hours ago

Sponsored Articles

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

...

Day & Night Air Conditioning, Heating and Plumbing

Day & Night is looking for the oldest AC in the Valley

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.

...

Sanderson Ford

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

Stocks lose more ground on fears a recession may be looming