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Market Snapshot: US inventory indices tumble on Friday, led by a pointy decline within the Nasdaq Composite as investor sentiment clouded after the job report

The US stock benchmarks closed lower on Friday, giving up solid opening gains and recording another week of losses as investors judged a weaker-than-expected job report in November unlikely to hold the hand of a Federal Reserve apparently on it is out to curb inflation.

How were stock benchmarks traded?

The Dow Jones Industrial Average DJIA fell 59.71 points, or 0.2%, to close at 34,580.08 after hitting 34,801.31 near the open.

The S&P 500 index
SPX,
-0.84%
slipped 38.67 points, or 0.8%, to finish at 4,538.43 after hitting an intraday high at 4,608.03.

The Nasdaq composite index
COMP,
-1.92%
lost 295.85 points, or 1.9%, to finish at 15,085.47, near the 100-day moving average at 15,082.44, according to FactSet.

On Thursday, the Dow Industrials rose 617.75 points, or 1.8%, to 34,639.79 – the best percentage increase since March 5, 2021 and the best point gain since November 9, 2020. The S&P 500 index closed at 1, 4% to 4,577.10, its best day since October 14th. The Nasdaq Composite was up 0.8% to 15,381.32. The small-cap-oriented Russell 2000 Index
FURROW,
-2.13%
rose 2.7% on Thursday to end at 2,206.33, a day after the first correction since June 2020.

All three major indices posted losses for the week, with the Dow down 0.9%, the S&P 500 down 1.2% and the Nasdaq down 2.6%. That Dow was down for a fourth straight week, while the S&P 500 and Nasdaq each closed for the second straight week of weekly declines.

The Russell 2000 Index was down 3.9% weekly.

What drove the markets?

The markets ended lower when a Department of Labor report showed the US created just 210,000 new jobs in November, well below estimates by economists polled by the Wall Street Journal to add 573,000 new jobs. But the numbers were so positively perceived that concerns about an aggressive tightening of financial conditions by the US Federal Reserve re-emerged.

"I don't think there was much in this report that would undo plans for a faster rejuvenation," which the Federal Reserve appears to be considering to slow down its asset purchases, or rate hikes "come much sooner than investors had just expected ". three months ago, “while the economy continues to recover during the pandemic, Penn Mutual Asset Management's chief investment officer, Mark Heppenstall, said in a telephone interview on Friday.

While Friday's job report headline number was "not great," some "favorable trends" in the data showed an increase in labor force participation, which the Fed is likely to see as a "gain" in line with its goal of maximum employment, according to Heppenstall. He said markets are likely to face more volatility as the Fed shifts from prioritizing adjustment for economic recovery and focusing more on inflation.

Read: Jekyll-and-Hyde US job report isn't as ugly as it looks

Fed chief Jerome Powell's remarks on Tuesday about a potential acceleration of the central bank's throttling process amid high inflation and uncertainty about the impact of the new Omicron variant of the coronavirus were the main cause of unease in the market this week.

"We've had significant volatility almost every day this week," said Tom Mantione, managing director of UBS Private Wealth Management in Stamford, Connecticut, in a telephone interview on Friday. "You are at a turning point in Fed policy," he said.

The lackluster headline number on Friday's job report came despite companies taking more aggressive steps towards hiring and could highlight the challenges the labor market faces in recovering from the pandemic, especially as the spread of the Omicron variant takes shape.

As for the bright spots of the job report, around 594,000 people returned to work in November, with the so-called employment rate rising to 61.8%. The unemployment rate fell from 4.6% to 4.2% and thus reached a new pandemic low.

"While the headline number was disappointing, the rest of the report was much better and this might help explain why stocks are floating," wrote Michael Hewson, senior market analyst at CMC Markets UK, in a daily note.

Investors are scrutinizing the job report because if the Fed evaluates it positively, the central bank could accelerate rate hikes and deal a blow to rate-sensitive, growth-oriented stocks in the tech sector.

Read: According to Bostic, the Fed may have to end its bond buying stimulus strategy in the spring

"The markets have a lot to digest as the economy is strong, but the labor market is at its full potential and the forces of inflation are already rising faster than many people expect," wrote Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance.

The market also has ongoing concerns that technology valuations have been too high, perhaps due to the sharp fall in stocks of DocuSign DOCU was down 42.2% on Friday after the company's billing and electronic signature sales forecast fell short of expectations, and the CEO said the pandemic boom subsided in the quarter.

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In other economic reports on Friday, the last November value of the IHS Markit's service sector purchasing managers' index was 58, up from an initial value of 57. The Institute for Supply Management's more closely monitored services value rose from 66.7 to 69 in November, 1 above forecasts. A score of 50 or better indicates an improvement in conditions. Factory orders in the US were up 1% in October.

In US policy, the late Thursday Congressional passage through a short-term extension of state funding to February 18 prevents a partial shutdown after a stalemate over vaccine regulations was resolved. On Friday, President Joe Biden signed the bill to keep the federal government going.

Which companies were in focus?

US-listed stocks of Chinese companies came into focus on Friday after the Chinese ride-hailing giant I have Global DIDI said late Thursday that it would be removed from the New York Stock Exchange under pressure from the Chinese government. Didi's shares fell 22.2% on Friday.

Shares in Marvell technology
MRVL,
+ 17.68%
Shares rose 17.7% after the chipmaker's results and outlook beat Wall Street's forecasts.

How were other assets traded?

The yield on the 10-year government bond BX: TMUBMUSD10Y fell more than 10 basis points to 1.342% on Friday. According to Dow Jones Market Data, the yield fell 14.2 basis points this week for the largest weekly decline since June 2020. As yields rise, Treasury prices come down.

The ICE US dollar index DXY, a measure of the currency versus half a dozen other currency units, has barely changed.

In Oil Futures, West Texas Intermediate Crude CL00 for January delivery
CLF22,
-0.42%
fell 0.4% on Friday to settle at $ 66.26 a barrel for a sixth straight week of declines.

Gold futures
GC00,
+1.20%
for February delivery
GCF22,
+ 1.25%
rose 1.2% to settle at $ 1,783.90 an ounce. This week, gold prices traded nearly 0.1% lower based on the most active contract, according to Dow Jones Market Data.

The Stoxx Europe 600 Index
SXXP,
-0.57%
closed 0.6% lower on Friday for a 0.3% weekly decline. London's FTSE 100 index
UKX,
-0.10%
slipped 0.1% but remained up 1.1% for the week.

In Asia is the Shanghai Composite Index
SHCOMP,
+ 0.94%
closed 0.9% higher on Friday for a weekly gain of 1.2% on the Hang Seng Index
HSI,
-0.09%
Hong Kong closed 0.1% lower, bringing the decline to 1.3% for the week. Japan's Nikkei 225 index
NIK,
+ 1.00%
closed 1% higher on Friday but still lost 2.5% for the week.

—Barbara Kollmeyer contributed to this article.

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