Dow tanks as jobs growth boosts Fed hike bets

The stock market was spooked by fears that a deeper recession might be in the offing as the government’s latest jobs report indicated that unemployment continues to hover at near-record low levels — complicating the Fed’s efforts to bring inflation under control.

The Dow Jones Industrial Average plummeted 630.15 points, or 2.1%, on Friday, while the S&P 500 shed 2.8%. The tech-dominated Nasdaq Composite Index dropped by 3.8%, or more than 400 points. The major indexes still ended the week higher after stocks soared on Monday and Tuesday.

The Bureau of Labor Statistics announced Friday that American companies added 263,000 new jobs last month while the unemployment rate ticked down further to 3.5%.

Analysts had expected the economy to add 275,000 jobs, but while hiring slowed a bit, the labor market continued its robust streak.

That has economists worried that the Federal Reserve will further raise interest rates — increasing the risk of a deeper recession.

“The strong commitment to higher short-term rates drove rates up across the curve, rattling markets and undermining a previous market assumption that the Fed would pause increases in the event of a recession,” Brad McMillan, chief investment officer for Massachusetts-based Commonwealth Financial Network, told The Post.

Stock chart showing Dow down more than 400 points.
The Dow was down more than 400 points after jobs data was released.

“Higher rates typically mean lower stock valuations, and this was a significant driver for the weak performance last quarter.”

McMillan said that with the Fed likely to boost interest rates even further this month, “there could be more pressure on markets.”

Dire forecasts from Samsung Electronics and Advanced Micro Devices sent chip-related shares lower on Friday, sparking fears that a slump in demand for semiconductors could be much worse than expected.

AMD, Nvidia, Intel, Qualcomm and Micron Technology were down between 1.2% and 6%, weighing on smaller peers such as Marvell Technology and Applied Materials.

Samsung, the world’s top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts.

The chip sector has been grappling with weak demand, spurred by decades-high inflation, rising interest rates, geopolitical tensions and pandemic-related lockdowns in China, hitting the PC and smartphone market as businesses and consumers rein in expenses.

Traders on Wall Street dig in for long day as stocks plunged after release of continuing strong jobs growth boosted chances that more rate hike pain looms.
Traders on Wall Street dig in for long day as stocks plunged after release of continuing strong jobs growth boosted chances that more rate hike pain looms.

Nearly a dozen analysts cut their price targets on AMD’s shares by as much as $50 after the US-based chipmaker slashed its third-quarter revenue outlook by about a billion dollars.

“We believe AMD’s warning will have the most negative read-across for PC peer Intel, but also somewhat for Nvidia and related memory and data center peers,” BofA Securities analyst Vivek Arya said.

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