New York – U.S. stocks ended lower Friday after a strong March employment report stoked interest-rate fears, and wiped out most of the week’s gains to kick off the second quarter on a muted note.
The Dow Jones Industrial Average fell 96.46 points to 11,120.04. On the week, the benchmark index gained a modest 0.1 percent.
The Nasdaq Composite Index slipped 22.15 points at 2,339.02. The tech-rich index is flat on the week.
The S&P 500 Index dropped 13.54 points to 1,295.50. The broad gauge managed scraped in a gain of just under 0.1 percent.
A surge in bond yields placed the benchmark 10-year yield within striking distance of 5 percent on Friday, sending capital flows out of equities and into the bond market, according to Todd Leone, head of listed trading at S.G. Cowen.
“People are asking themselves why they should be in the stock market if they can get a 5 percent return safely,” Leone said.
Art Hogan, chief market strategist at Jefferies & Co., said, “We’re creating a lot of jobs and a lot of jobs will create a tight labor market and a tight labor market will cause wage price pressure. That combination of factors does not make the Fed stop at 5 percent.”
Others offered different reasons for the pullback.
For Barry Ritholtz, president of Ritholtz Capital Partners, investors were also locking in profits after the market ran up in anticipation that the jobs report would be strong.
“To some degree you had a run-up in the week leading to the report,” said Ritholtz. The major indexes had been looking at more than 1 percent gains for the week, before Friday’s pullback.
For Mike Viracola, managing director at Adams Harkness, it’s more a “buyer’s strike” as investors head into the weekend and next week’s short trading week. The New York Stock Exchange will be closed for Good Friday.
Before the sell-off on the bond market, market sentiment actually improved after the Labor Department reported the U.S. economy created 211,000 jobs in March, more than the 187,000 expected by economists polled by MarketWatch. The unemployment rate also ticked lower to 4.7 percent.
Of equal importance, wage growth was tame, rising 0.2 percent for the month versus 0.3 percent expected. Wage inflation is an aspect of the economy the Fed is watching closely when it makes its decision on interest rates.
The Federal Reserve has raised interest rates fifteen times in a row over the past two years in a bid to slow economic growth and keep inflation at bay. Its fed funds rate now stands at 4.75 percent.
