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Wall Street tumbles as jobs growth cements rate hike bets

Economy Oct 08, 2022 04:54
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© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 26, 2022. REUTERS/Brendan McDermid
 
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By Shreyashi Sanyal and Ankika Biswas

(Reuters) -U.S. stocks nosedived on Friday as solid job growth and a drop in the unemployment rate last month boosted the chances of more jumbo-sized interest rate hikes, while a revenue warning from Advanced Micro Devices (NASDAQ:AMD) hit chipmakers.

The Labor Department's closely watched employment report showed nonfarm payrolls increased by 263,000 jobs last month after rising 315,000 in August.

The report also showed the jobless rate fell to 3.5% in September, lower than expectations of 3.7%. Traders now see a 92% chance of 75 basis-point hike by the Federal Reserve, up from 83.4% before data.

Aggressive rise in borrowing costs have stoked fears of slowing economic growth and a hit to corporate profits, but with the labor market remaining tight, the U.S. central bank was likely to continue with its monetary tightening plan.

"While the labor supply and demand remain in this state, combined with high inflation, the Fed will continue to be forced to tighten until the economy snaps off its current momentum," said Rusty Vanneman, chief investment strategist at Orion Advisor Solutions.

Sticking to the hawkish tone by most Fed officials, New York President John Williams said more rate hikes were needed to tackle sticky inflation.

The Philadelphia SE Semiconductor index shed 5.14%, and was set for its biggest one-day percentage decline in nearly a month as a revenue warning from Advanced Micro Devices signaled the chip slump could be worse than expected.

AMD lost 10.82% as its third-quarter revenue estimates were about a billion dollars less than previously forecast.

Peers Qualcomm (NASDAQ:QCOM) Inc, Intel Corp (NASDAQ:INTC), ON Semiconductors, Lam Research (NASDAQ:LRCX), and Nvidia Corp shed between 2.44% and 6.63%.

"People who had been hoping for some kind of turnaround in the chips are starting to give up that hope," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

The S&P 500 technology sector index fell more than 3%, leading declines among the 11 major sector indexes.

At 11:56 a.m. ET, the Dow Jones Industrial Average was down 495.62 points, or 1.66%, at 29,431.32, the S&P 500 was down 82.39 points, or 2.20%, at 3,662.13, and the Nasdaq Composite was down 344.02 points, or 3.11%, at 10,729.30.

All three main Wall Street indexes are still set to snap a three-week losing streak, heading for their biggest weekly gain in almost a month.

With the benchmark 10-year Treasury yield rising to 3.910%, most rate-sensitive technology and growth stocks such as Alphabet (NASDAQ:GOOGL) Inc, Amazon.com (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT) fell between 2.14% and 4.46%.[US/]

FedEx Corp (NYSE:FDX) lost 2.42% after an internal memo accessed by Reuters showed the company's division that handles most of the e-commerce deliveries plans to lower volume forecasts as its customers plan to ship fewer holiday packages.

Declining issues outnumbered advancers for a 4.96-to-1 ratio on the NYSE and for a 3.79-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and 54 new lows, while the Nasdaq recorded 16 new highs and 214 new lows.

Wall Street tumbles as jobs growth cements rate hike bets
 

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