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U.S. stocks edged lower on Thursday, weighed by big technology stocks and a surprisingly strong jobs report that fanned fears that the Federal Reserve could stick to keeping rates elevated.
Amazon (AMZN) and Alphabet (GOOG) (GOOGL) dragged the tech-heavy Nasdaq Composite (COMP.IND) after disappointing earnings, with the index dropping 1.5%. The S&P 500 (SP500) slid 1.1%, while Dow (DJI) posted a narrower loss at 0.4% as Apple (AAPL) reversed course after weak earnings as analysts believe its strengthening customer base should provide a tailwind.
Jobs growth accelerated in January, adding more than half a million (517K) to nonfarm payrolls, blowing past 185K consensus and almost double the figure in December. Unemployment rate ticked down to 3.4%, its lowest level since 1969.
“This is an extremely impressive jobs number, though January data always has to be taken with a grain of salt. January typically features a broad annual purge of payrolls,” said Jefferies analyst Thomas Simons. “This big increase shows how reticent employers are to let go of employees that they struggled so much to find over the past two years.”
The data should motivate the Fed to continue with gradual rate hikes in the coming months, Simons added.
Meanwhile, yields were up, with the 10-year Treasury yield (US10Y) 13 bps higher at 3.53% and the 2-year yield (US2Y) up 21 bps at 4.30%. Additionally, the U.S. dollar index (DXY) gained 1.1%.
“So rightfully, people are clearly feeling suspicious about this payroll. Otherwise bonds would be down (yields up) way more,” Tom Graff, head of research at Facet, tweeted.
Meanwhile, ISM services rose more than expected in January after a contraction in the prior month. U.S. PMI Composite ticked higher in the final reading for January, with private sector output shrinking at the slowest pace in three months.
Among active stocks, Nordstrom (JWN) soared on a report that Ryan Cohen had taken a stake.
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