US stocks plunged Friday as Wall Street weighed in on the government’s monthly jobs report.

The US economy added 263,000 jobs last month as the unemployment rate fell to 3.5%. The economist expected employment to rise by 255,000 and the unemployment rate to remain at his 3.7%.

The S&P 500 (^GSPC) is down 1.8%, while the Dow Jones Industrial Average (^DJI) is down almost 400 points (1.3%). Nasdaq Composite (^IXIC) plunged 2.5% to lead the decline. Meanwhile, in the bond market, U.S. Treasury yields surged, with his benchmark 10-year note rising 7 basis points to 3.9% and the 2-year yield rising 8 basis points to 4.3%. .

“The negative market reaction suggests that investors may not see a change in the Fed’s aggressive policy in the near future,” said Mike Loewengart, head of model portfolio construction for Morgan Stanley’s Global Investment Office. It may indicate that we are processing Note. “Keep in mind that the next Fed decision won’t be made until early November, so we’ll have a lot more data to digest than just next week’s inflation gauge.

Investors were betting that signs of a cooling labor market would force policy makers at the Federal Reserve to change their aggressive rate-hiking trajectory. Especially after a series of weak economic announcements showed a sharp contraction in manufacturing activity and a fall in job openings. But many Wall Street strategists have argued that hopes of an imminent turnaround are premature, and this jobs report seems to reinforce that sentiment.

In a recent research note, JP Morgan analysts said it would take a low labor cost of 100,000 jobs per month for the market to change the Fed’s expectations, while Bank of America analysts said the Pivot would ” “It won’t happen until costs settle down,” he said.

“The Fed’s job is far from over,” said the BofA team, led by rates research strategist Megan Swiver.

Moreover, the Federal Reserve itself has sent a clear message in recent weeks that it has no plans to back out of aggressive policy intervention.

“We still have a long way to go,” Chicago Federal Reserve Governor Charles Evans said Thursday, suggesting a likely benchmark rate of 4.5% to 4.75% by spring 2023. Monetary policy setting. “

WASHINGTON DC - JULY 26: Construction workers look outside the Marriner S. Eccles Federal Reserve building on July 26, 2022 in Washington DC. Federal Open Market Committee (FOMC) officials We are holding a two-day meeting as the Federal Reserve is expected to raise interest rates again this week to fight inflation.  (Photo by Anna Moneymaker/Getty Images)

WASHINGTON DC – JULY 26: Construction workers look outside the Marriner S. Eccles Federal Reserve Building on July 26, 2022 in Washington DC. (Photo by Anna Moneymaker/Getty Images)

US crude futures continued their gains this week following the biggest OPEC+ production cut since 2020. DataTrek Research pointed out that West Texas Intermediate (WTI) crude oil above $85 a barrel will prolong the positive energy inflation trend until at least early 2023. The firm also noted that oil prices are an “undervalued fulcrum problem” for the Federal Reserve and market expectations for near-term economic growth. WTI futures traded above $90 a barrel earlier on Friday, gaining $10 more this week.

Elsewhere, chip makers came under pressure Friday morning after Advanced Micro Devices (AMD) cut its third-quarter earnings guidance and warned of a “significant” destocking across its PC supply chain. Stocks plunged him 9% early in the session. The sector was also weighed down by Samsung reporting its first profit decline since his 2019.

Levi Strauss (LEVI) also performed strongly on Friday after retailers cut guidance, citing headwinds from a stronger dollar, weaker consumer demand and persistent supply chain disruptions. Shares fell nearly 9% on Friday.

Meanwhile, Draft King (DKING) shares surged 4% after Bloomberg News reported Thursday that ESPN was nearing a major new partnership deal with the sports betting firm, citing sources familiar with the deal. did.

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Alexandra Semenova is a reporter at Yahoo Finance. follow her on her twitter @alexandraandnyc

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