Stocks pull back on weak jobs gains

The Dow rose nearly 150 points shortly after the open but was down more than 200 points, or 0.7%, in late afternoon trading. The S&P 500 gave up earlier gains too and was down 1.4%. Tech stocks really took it on the chin. The Nasdaq fell 2.6% after opening in green.

The weaker jobs gains could mean the Federal Reserve will keep propping up the economy. The central bank may not have to speed up its plans to unwind stimulus. It could also delay any interest rate hikes until later in 2022.

But there was some good news in the jobs report too though, which may be muddling the picture for investors (and the Fed) a bit. Despite the tepid gains in the number of jobs added, the unemployment rate fell to a new pandemic-era low of 4.2%.

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To that end, analysts from Barclays noted in a report Friday that “the Fed will feel more urgency to remove accommodation” in light of how rapidly the unemployment rate has dropped. It stood at 5.2% as recently as August.

It’s been an eventful week for US stocks. Market volatility has returned with a vengeance as of late, starting with the massive drop in the abbreviated trading session on Black Friday last week due to concerns about the Omicron variant of Covid-19.
Omicron and the Fed might finally kill this bull market

Stocks are still down for the week. The Dow has fallen 1.4%. The S&P 500 is off 1.8% and the Nasdaq has dropped nearly 3.5%. The markets have been whipsawed on the news earlier this week that Omicron cases have arrived in the US.

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“There is still significant investor apprehension,” said David Jilek, chief investment strategist at Gateway Investment Advisers. “The market is more susceptible to volatility.”

Investors are also weighing comments from Federal Reserve chairman Jerome Powell, who testified to Congress Tuesday that the Fed had “retired” the use of the word transitory to describe current inflation.
Powell also freaked out markets by suggesting that the Fed could speed up its plans to cut back on, or taper, its bond purchase program. The Fed’s bond buys have helped keep long-term rates low.

One strategist said that Friday’s weak jobs report likely won’t be enough to push the Fed into slowing down the taper.

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“Inflation pressure has become such an issue,” said Katy Kaminski, chief research strategist at AlphaSimplex Group. “It’s affecting everybody. Regardless of how unpleasant it is to consider tightening credit and raising rates, it’s something that has to happen.”

CNN’s Matt Egan contributed to this story.

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