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The stock market moved lower on Friday and government bond yields surged after the US economy added a more-than-expected 390,000 jobs in May, with the strong labor market signaling to investors that the Federal Reserve will continue with its path of aggressively tightening monetary policy .
The labor market recovery makes it unlikely that the Fed will halt its rate-hiking campaign anytime … [+]
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The Dow Jones Industrial Average fell 1.1%, around 350 points, while the S&P 500 lost 1.6% and the tech-heavy Nasdaq Composite 2.5%.
The US economy added 390,000 jobs in May—higher than the roughly 328,000 new jobs economists were expecting but falling short of the 436,000 jobs added in April, according to new data from the Labor Department on Friday.
Experts now warn that the strong job numbers will “likely reverse any hopes the Fed would consider a pause in rate hikes after the June/July increases,” according to Tom Essaye, founder of the Sevens Report.
“The labor market is tight and job growth is stable,” says Jeffrey Roach, chief economist for LPL Financial, who adds that this will make it possible for the Federal Reserve to “continue to tighten financial conditions and remove the historic level of accommodation in the markets.”
Government bond yields surged widely after the jobs data, weighing on stocks as investors remain concerned about rising rates leading to an economic slowdown: The closely watched ten-year Treasury note jumped to 2.97% on Friday.
Technology shares were particularly hard-hit by the rising rates and dragged markets lower, while recently rebounding consumer stocks were also among one of the worst-performing sectors on Friday.