Stocks wavered and bond yields rose on Friday after the government’s report on jobs showed a bigger-than-expected gain in hiring in June, a positive development for the labor market but a sign that high inflation may persist.
The better-than-expected employment numbers may dispel some worries about an imminent economic slowdown, but with prices rising fast, a robust labor market and rising wages could complicate the Federal Reserve’s fight against inflation. If the central bank continues to raise interest rates aggressively to rein in stubbornly high inflation, that could eventually tip the economy into a recession.
The S&P 500 flitted between small losses and gains on Friday and ended marginally lower. Friday’s trading followed four consecutive daily increases, a rare stretch during a period where the predominant direction has been downward. The index fell nearly 21 percent in the first half of the year, its worst start to the year since 1970.
Away from the labor market, other economic signals, ranging from retail sales to housing to copper prices, reflect an economic slowdown already underway, lending credibility to some analysts’ recession warnings.
“On the face of it, employment growth at 300,000-plus a month doesn’t point to a recession,” said Michael Gapen, the head of U.S. economics for Bank of America. But the Fed is trying to reduce inflation, “and it’s going to need to do that by turning to a more restrictive monetary policy,” he said, suggesting more large interest rate increases ahead.
The yield on the 10-year Treasury note, a benchmark for borrowing costs, jumped to just over 3 percent after the jobs report was released. But the 10-year yield remained moderately below the two-year yield, creating a so-called inverted yield curve, a rare signal often considered a precursor to a recession.
Economists at Deutsche Bank are forecasting a U.S. recession next year. “I think the yield curve is getting closer to that scenario,” said Tim Wessel, a strategist at the bank.
Oil prices, which have been slipping as fears of a slowdown spread among traders, rose, with West Texas Intermediate crude oil up nearly 2 percent, at more than $104 a barrel.
The euro slipped in early trading and nearly hit one-for-one parity with the U.S. dollar before turning upward, while Europe’s Stoxx 600 index closed with a 2.5 percent gain for the week. The British pound held most of Thursday’s gains against the dollar, which came after Boris Johnson said he would resign as Britain’s prime minister. The FTSE 100 index, Britain’s stock market benchmark, ended the week up slightly.
Asian markets mostly rose, although fell from their highs on Friday after Shinzo Abe, the former prime minister of Japan, was shot at a political rally, shocking the nation. Mr. Abe, the longest serving leader in Japan’s postwar history, later died of his injuries, at age 67.
Source: nytimes.com
