Weekly Losses in U.S. Indexes as Rapid Jobs Recovery Begins to Cool

Barry Adams
03 Jun, 2022
New York City

U.S. investors turned cautious after the latest jobs reports showed tight labor market conditions and rising wages. 

The S&P 500 index dropped 1.7% to 4,108.51 and the Nasdaq Composite declined 2.7% to 12,012.73. 

For the week, the S&P 500 index declined 1.2% and the Nasdaq dropped 1%. 

Stocks were on the defensive after employers added 390,00 net new jobs in May and inched ever closer to the employment levels seen in 2019. 

Rate increase worry was front and center and the yield on 10-year Treasury notes jumped to 2.955%. 

Futures of crude oil gained $3.32 to $120.19 and rose to a new 8-year high after traders bet that the expanded job market will sustain higher demand for petroleum products.  

The good news on the labor front was seen as a bad news for investors because expanding labor markets are likely to stoke aggregate demand even higher, precisely what the Fed is trying to cool with higher rates. 

The Fed has advertised two rate increases in as many months starting June impacting valuations of tech and growth stocks where larger earnings are in future. 

The tech-heavy Nasdaq dropped nearly 3% on the worries that the sustained and aggressive rate increase may be the only way policymakers will be able to kill the aggregate demand in the economy increasing the recessionary risks. 

Investors reacted strongly to negative news and generally ignored positive news today. 

Tesla dropped as much as 10% after the electric vehicle maker's CEO in an internal memo to employees announced a hiring freeze and a plan to trim 10% staff. 

lululemon declined 1% despite the retailer reported a 32% increase in sales in the latest quarter and a jump in earnings. 

The premium sports apparel maker lifted annual revenues outlook on sustained demand for its high-priced products. 

In Europe, indexes turned lower following the weakness on Wall Street. 

The DAX index declined 0.2% to 14,460.09 and the CAC-40 index dropped 0.23% to 6,485.30, and markets in the U.K. were closed. 

In Asia, the Nikkei 225 rose 1.3% to 27,761.57, Hang Seng Index declined 1% to 21,082.13, and the Sensex index edged down 0.09% to 55,769.23.