Yahoo Lifestyle Stock Market News for Feb 6, 2023
Wall Street closed sharply lower on Friday, dragged down by mega-cap tech stocks. Stronger-than-expected labor market numbers stoked concerns that the Fed might reconsider its recent dovish stance and re-embark on its path of aggressive rate hikes. All three major indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.4% or 127.93 points to close at 33,926.01. Sixteen components of the 30-stock index ended in negative territory, while 14 ended in positive.
The S&P 500 lost 1% or 43.28 points to close at 4,136.48. All the 11 broad sectors of the benchmark index ended in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) slid 3.1%, 2.1% and 2.1%, respectively.
The tech-heavy Nasdaq declined 1.6% or 193.86 points to finish at 12,006.96.
The fear-gauge CBOE Volatility Index (VIX) was down 2.1% to 18.33. A total of 12.8 billion shares were traded on Friday, higher than the last 20-session average of 11.9 billion. Decliners outnumbered advancers on the NYSE by a 2.82-to-1 ratio. On the Nasdaq, a 1.66-to-1 ratio favored declining issues.
Nonfarm Payroll Number Keeps Investors Worried
The Bureau of Labor Statistics showed that nonfarm payrolls increased by 517,000 in January, the maximum in six months. This marks almost a three-times increase over any consensus estimate for the period. Data for December was revised higher to show 260,000 jobs added against the previously reported 223,000. Also, the economy added 4.8 million jobs in 2022 instead of the 4.5 million previously reported.
These numbers, in regular times, would indicate a bustling, robust labor market, which would feed directly into a prosperous economy. However, in a post-2022 world, we continue to remain in a “good news is bad news” situation. Added to this, the unemployment rate came in at 3.4%, the lowest since 1969.
This stubbornly tight labor market continues to be a cause for concern in any market investor’s eyes, even as the Fed takes a dovish turn. Throughout the rally in January, when stocks rose based on economic indicators pointing at a slowdown induced by the Fed, labor market numbers have continued to be a bone of contention. Now, when the Fed has actually given signals that the country may be in a disinflationary economy and markets have rejoiced, these historically good labor market numbers have made investors nervous.
It is not beyond the realm of possibility that the central bank might consider a fair way in tightening its monetary policy, namely, increasing its pace of rate hikes, before pushing the brakes. Friday’s trade reflected this gloom as investors made their move cautiously. Consumer Discretionaries and Utilies were the worst hit sector.
Consequently, shares of American Electric Power Company, Inc. AEP and Starbucks Corporation SBUX slid 2.6% and 4.4%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Institute for Supply Management (ISM) reported that the services sector grew in January after contracting in December, with the Services PMI coming in at 55.2, against a consensus of 50.6 for the period. The December number was revised down to 49.2 from the previously reported 49.6.
Weekly Roundup
Two of the three most widely followed indexes closed the week higher on Friday, with the tech-heavy Nasdaq posting its fifth-straight weekly gain. The Nasdaq Composite continued to make gains on a tech rally, rising 3.3% for the week. The S&P 500 also advanced 1.6% for the week, with the Dow Jones Industrial Average remaining the only outlier, contracting 0.2%.
Most of the positivity seen in the market throughout the week arose out of the signals coming in from the FOMC meeting for February. The interest rate hike was brought down by the apex bank to 25 bps, on expected lines, but more importantly, Fed chair Jerome Powell acknowledged that the disinflationary process had started. The strong labor market numbers, however, remained a cause for concern.
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