Nasdaq, S&P 500, Dow Jones drop with jobs data keeping Fed on track

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The stock market is still lower Friday after the May jobs numbers further diminished any hope of a Fed pause.

The Nasdaq (COMP.iND) -2.6%, off 324 to 11,994, is down the most. The Dow Jones (DJI) is -1.1%, down 347 to 32,902, and S&P 500 (SP500) -1.7%, down 70 to 4,106, are also lower.

Ten of 11 S&P sectors are lower. The megacap sectors are doing the worst with Consumer Discretionary at the bottom with Tesla off sharply. Energy is the only gainer.

Nonfarm payrolls rose 390K last month. Investors look worried that the labor market is still too hot for the Fed’s liking.

BofA said nothing short of a drop in monthy jobs will stop an aggressive Fed this year.

“The long run of hefty upward revisions now seems to be over, so we’re going to take these data at face value,” Pantheon Macro’s Ian Shepherdson said. “Job growth has slowed in recent months, but it remains well above the 230K trend in place before Covid, so employers are still catching up.”

“Overall, this is not a game-changing report. But the continued moderation in wage growth is a big deal; if the numbers had rebounded, it would be much harder to make the case that a 25bp hike in July is a real possibility. In the event, it is still in play, but a great deal depends on next week’s CPI data.”

The 10-year Treasury yield is up 5 basis points to 2.96%, with the 2-year up 3 basis points to 2.67%.

There were some encouraging data points for those worried about too much Fed tightening. Average hourly earnings rose less than anticipated and the labor force participation rate rose.

“The odds of a wage price spiral are declining yet again,” Adam Ozimek, chief economist at Innovate Economy, tweeted. “This wasn’t the most likely scenario to begin with, but whatever odds you place, the probability has fallen with the last few reads.”

Markets were dented early from some more dour comments on the economy. Elon Musk is reportedly looking at cutting 10% of Tesla’s workforce and has a “super bad feeling” on the economy. Jamie Dimon roiled the market earlier this week with his economic hurricane remarks.