Stocks slip as strong jobs report dims hopes for an interest-rate cut

The New York Stock Exchange in lower Manhattan.
(Spencer Platt / Getty Images)

Bond yields rose and stocks on Wall Street posted modest losses Friday, a downbeat end to an otherwise banner week.

The small decline snapped a six-day winning streak for the Standard & Poor’s 500 index, though the benchmark index still notched a weekly gain. The S&P 500 set three all-time closing highs this week — on Monday, Tuesday and Wednesday — extending the market’s solid gains from June into July. The S&P 500 is up 19.3% so far this year.

The major indexes headed lower from the get-go Friday, a tumble that briefly knocked 230 points off the Dow Jones industrial average. Investors got rattled by government data showing an unexpected burst of hiring last month. The strong jobs report raised fresh doubts about whether the Federal Reserve will cut interest rates this month.

Most investors had anticipated a Fed rate cut this month, and perhaps one or two additional cuts later in the year, after the central bank signaled in June that it was prepared to lower interest rates to keep the nation’s economy growing. The June jobs data give the Fed less reason to make those cuts.

The S&P 500 fell 5.41 points, or 0.2%, to 2,990.41. The Dow fell 43.88 points, or 0.2%, to 26,922.12.


The Nasdaq composite edged down 8.44 points, or 0.1%, to 8,161.79. The Russell 2000 index of smaller-company stocks rose 3.50 points, or 0.2%, to 1,575.62.

Trading volume was light as U.S. markets reopened after the Independence Day holiday.

Traders bet Friday that a rate cut in late July could be less likely now. Investors sold bonds, lifting the yield on the 10-year Treasury note to 2.04% — up from 1.95% late Wednesday, a big move. Bond yields fell through much of June as investors’ expectations rose that the Fed would cut interest rates.

The jump in bond yields helped boost financial stocks, which led the gainers. Higher bond yields push up interest rates that banks charge on mortgages and other loans. Jefferies Financial Group shares climbed 3.4%, making the stock the biggest gainer in the S&P 500.

Home builders fell broadly as bond yields rose, setting the stage for higher mortgage rates that could crimp home sales. KB Home shares slid 2.4%.

Healthcare, industrial, technology and consumer staples stocks accounted for much of the selling. Regeneron Pharmaceuticals dropped 3.6%, Rockwell Automation slid 2.9%, and Nvidia and Kellogg each fell 1.6%.

Video game maker Electronic Arts was the biggest decliner in the S&P 500. It fell 4.5% on concerns that the second-season release of its “Apex Legends” game may not satisfy gamers as hoped.

A slight easing of trade tensions between the United States and China helped spur the market’s gains early in the week. Both nations have agreed to refrain from new tariffs while they open a new round of negotiations. The development relieved some pressure on the market, though the trade war still looms over global economic growth.

White House economic advisor Larry Kudlow told reporters Thursday that he expected to announce new negotiations soon. Still, forecasters warn that the truce is fragile because the two sides still face the disputes that caused talks to break down in May.

Besides any developments on trade, the next major catalyst for the market will probably be the flood of earnings reports that companies are set to release in coming weeks as the second-quarter reporting season begins.

Expectations are generally low, and this could be the first time in three years that S&P 500 companies report a back-to-back decline in overall earnings, according to FactSet.

Energy futures prices closed broadly higher Friday. Benchmark crude oil rose 17 cents to settle at $57.51 a barrel. Brent crude oil, the international standard, rose 93 cents to close at $64.23 a barrel. Wholesale gasoline rose 1 cent to $1.93 a gallon. Heating oil rose 1 cent to $1.91 a gallon. Natural gas rose 13 cents to $2.42 per 1,000 cubic feet.

Gold fell $21.00 to $1396.70 an ounce. Silver fell 33 cents to $14.92 an ounce. Copper fell 2 cents to $2.66 a pound.

The dollar rose to 108.58 yen from 107.78 yen. The euro weakened to $1.1222 from $1.1285.

Bloomberg was used in compiling this report.