Investors across the nation experienced a turbulent day on Wall Street as stocks, bonds, bitcoin, and gold were sold off following a robust jobs report. The report heightened expectations that the Federal Reserve might raise interest rates later this year to address inflation concerns.
The S&P 500 dropped 1.8%, marking a downturn for the week and threatening to end a nine-week winning streak. The Nasdaq Composite, heavily weighted with technology stocks, fell 3%, experiencing its worst day since October. Meanwhile, the Dow Jones Industrial Average decreased by 407 points, or 0.8%.
This week, volatility in the S&P 500 increased as investors took profits from recent gains and adjusted their expectations for potential Federal Reserve rate hikes. The Bureau of Labor Statistics reported that the economy added 172,000 jobs in May, surpassing expectations. This job growth follows data indicating rising inflation, partly due to the oil price surge linked to the ongoing conflict with Iran.
As a result, traders now see a 43% chance of a Federal Reserve rate hike in December, up from 26% a month ago, according to CME FedWatch. James McCann, a senior economist at Edward Jones, noted that the data suggests the Federal Reserve is unlikely to ease rates this year, with markets concerned about a potential rate increase.
Treasury yields rose, with the 10-year yield, which influences mortgage rates, climbing to 4.54%. Higher Treasury yields can exert pressure on stock prices. The Nasdaq’s decline continued for a third consecutive day, driven by a sell-off in semiconductor chip stocks. AI-related stocks, which had seen significant rallies in recent weeks, also pulled back.
Impact on Cryptocurrency and Commodities
Bitcoin experienced a decline of more than 3%, trading just above $61,000, near its lowest level since October 2024. The cryptocurrency has dropped over 17% this week after a key industry player, Strategy, disclosed its first bitcoin sale since 2022. Bitcoin remains down more than 50% from its record high in October.
Gold prices also fell by more than 3%, as higher interest rates can make non-income-generating assets like gold less attractive. McCann emphasized that while the bar for rate hikes remains high, signs of a more persistent inflation spike could prompt the Federal Reserve to consider tightening monetary policy.
New Federal Reserve Chair Kevin Warsh faces a challenging task at his first meeting, given the complex policy landscape and divisions within the Federal Open Market Committee. CNN’s Fear and Greed Index, a measure of market sentiment, shifted to “neutral” from “greed” earlier in the week.
Oil prices declined on Friday, with Brent crude futures falling 2.3% to $92.90 per barrel, and US crude futures dropping 3.4% to just below $90 per barrel. Despite the fall in oil prices, Treasury yields rose, indicating that traders are focusing on the strong jobs data and its implications for inflation and interest rates.
Nigel Green, CEO of DeVere Group, commented that the jobs report provided a reason for policymakers not to cut rates. Although one report does not dictate policy, its magnitude can alter market probabilities, which traders recognized immediately.
Original reporting: KRDO (Colorado Springs metro) — read the source article.
