Stocks slipped and Treasury yields rose sharply on Friday after the release of a stronger-than-expected jobs report, signaling that markets may have to wait longer for interest rate cuts from the Federal Reserve.
The S&P 500 fell 0.1% to 5,346.99, capping off a strong week that saw the benchmark index rise 1.3%. The Nasdaq composite slipped 0.2% to 38,798.99, while the Dow Jones Industrial Average fell 0.2% to 38,798.99. Smaller company stocks fared even worse, with the Russell 2000 falling 1.1%.
U.S. employers added 272,000 jobs in May, surpassing economists’ expectations and suggesting continued strength in the job market. However, the report also showed a rise in the unemployment rate for the second consecutive month, adding complexity to the Federal Reserve’s decision-making on interest rates.
The yield on the 10-year Treasury jumped to 4.43% following the jobs report, while the two-year yield, which tracks expectations for the Fed, rose to 4.89%. Wall Street is hoping for at least one rate cut from the Fed before the end of the year, but the strong jobs market and signs of inflation pressure may delay those cuts.
Economic data earlier in the week hinted at a potential slowdown in the economy, with reports showing manufacturing contraction, weaker worker productivity, and declining job openings. However, gains in chip companies focused on artificial intelligence technology helped push the market to record highs throughout the week.
Investors will be closely watching next week’s updates on wholesale and consumer prices to get a clearer view of inflation’s trajectory. Fed officials are expected to hold interest rates steady at their upcoming meeting, with investors scaling back bets on a rate cut in July following the jobs report.
Retail earnings have also been in focus, with reports showing that consumers are cutting back on non-essential items due to stubborn inflation. GameStop, the video game retailer caught up in the meme stock craze, saw its shares slump 39.4% after reporting another quarterly loss and announcing plans to sell up to 75 million more shares.
