Stocks Closed Mixed After Jobs Report

4:07 pm Friday, July 08th, 2022

Stocks ended mixed Friday, after the June employment report revealed that the U.S. economy added more jobs than expected, spurring bets of a more hawkish Federal Reserve.

The employment situation report for June did nothing to deter the market from thinking that the Fed is going to remain on an aggressive rate-hike path. This mentality is reinforced by lingering growth concerns from the still inverted 2s10s spread and resulted in a choppy session thus far.

The only S&P 500 sector trading in the green is health care (+0.7%). Fellow countercyclical sectors, utilities (-0.3%) and consumer staples (-0.1%), are outperforming the broader market but cannot stay out of the red.

The biggest laggards are the materials (-1.1%), communication services (-0.9%), information technology (-0.8%), and industrials (-0.8%) sectors.

The advance-decline line was showing a reversal in buying interest. Earlier, advancers led decliners by a 13-to-10 margin at the NYSE. Decliners lead advancers by a 2-to-1 margin. Earlier at the Nasdaq, advancers led decliners by an 8-to-5 margin but now decliners are leading advancers by a 13-to-10 margin.

Also, the mega caps are underperforming the broader market. The Vanguard Mega Cap Growth ETF (MGK) is down 0.7% versus a loss of 0.5% for the S&P 500. The Invesco S&P 500 Equal Weight ETF (RSP) is down 0.6%.

Treasury yields have been on the rise today. The 2-yr note yield is up eight basis points to 3.11% while the 10-yr note yield is up eight basis points to 3.09%.

The employment situation report for June did nothing to deter the market from thinking that the Fed is going to remain on an aggressive rate-hike path. That is the key takeaway from the report, which was solid in terms of nonfarm payrolls growth (372,000) and still solid in terms of average hourly earnings growth (+5.1% year-over-year). It is likely being thought, too, that wage-based inflation pressures are apt to be sticky considering the labor force participation rate slipped in June to 62.2% from 62.3%.