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Stock market today: S&P and Nasdaq pull back after scorching jobs report

A landmark jobs report dragged stocks lower on Friday as it raised concerns about the Fed’s willingness to remain aggressive with its rate hikes.

Before the opening bell, the Labor Department said the US economy added 528,000 new jobs in July, more than double what economists had expected. The United States has now recovered the 22 million jobs lost in the first months of the pandemic. Also in the report: The unemployment rate fell to 3.5%, a level not seen since February 2020, while average hourly earnings rose 0.5% month-over-month and 5, 2% year over year.

“Job gains were widespread and particularly strong in sectors such as education, health care and government,” said Jeffrey Roach, chief economist for independent brokerage LPL Financial. “Given the stability of the labor market, particularly given the rising cost of borrowing and rising inflation, we do not expect the National Bureau of Economic Research (NBER) to call a recession at this point. The labor market is strong enough to offset weaknesses in other sectors of the economy such as real estate.”

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“This reading is positive for economic growth and households,” said Tim Courtney, chief investment officer of investment firm Exencial Wealth Advisors. “This should support consumer spending going forward. While this is good news, it likely means the Federal Reserve will continue to hike interest rates.”

It was this last point that pushed the 10-year Treasury yield up 15.4 basis points to 2.83% today. (A basis point equals one-hundredth of a percentage point.) This initially sent stocks deep into the red, though they bottomed as the session progressed. At the close, the Dow Jones Industrial Average rose 0.2% to 32,803. S&P 500 Indexmeanwhile, was down 0.2% at 4,145, while the Nasdaq Compound – whose components are the most sensitive to rising rates – lost 0.5% to 12,657.

Other news on the stock market today:

  • Small cap Russell 2000 gained 0.8% to 1,921.
  • U.S. Crude Futures rose 0.5% to end at $89.01 a barrel.
  • A strong dollar sent gold futures down 0.9% to $1,791.20 an ounce.
  • Bitcoin rose 2.1% to $22,926.10. (Bitcoin trades 24 hours a day; prices shown here are as of 4 p.m.)
  • Lyft (LYFT) climbed 16.6% after the ride-sharing company said it had 19.9 million passengers in the second quarter, driving revenue per passenger of $49.89 (higher than the 49 $.30 expected by analysts). LYFT also posted an adjusted profit of 13 cents per share against expectations of a loss per share of 4 cents, while revenue jumped 29.5% year-on-year to 990.7. millions of dollars. “While we are encouraged by the resumption of carpooling, thanks in part to the increase in airport volume and the momentum of corporate bookings, we recognize the concerns about the peak in travel demand,” says Angelo Zino. (Buy), analyst at CFRA Research. “That said, lagging regions on the West Coast (e.g. San Francisco) are now recovering faster than other regions and should support revenue in the second half. Additionally, we appreciate LYFT’s growing focus on EBITDA growth by being more cautious on expenses.”
  • carvana (CVNA) was another big winner after earnings, with shares up 40.1%. While the online car dealership reported lower-than-expected revenue of $3.8 billion and a broader adjusted loss of $2.35 per share in the second quarter, CEO Ernie Garcia said in the earnings call of the company that he was “changing direction to promote efficiency and cash flow. flows” in response to a difficult economic environment. “While we carefully review last night’s CVNA quarterly announcement and recent business trends, overall we view the momentum as ‘better than feared’ and suggesting underlying stabilization and improved operational control of company,” said Brian Nagel, analyst at Oppenheimer (Outperform).

Stay on the defensive!

Next up are inflation data, with July’s Consumer Price Index (CPI) due out Wednesday morning. Douglas Porter, chief economist at BMO Capital Markets, points to the recent decline in oil prices – US crude futures fell 6.8% in July and are down another 9.7% so far in August) as a reason to encourage investors about this upcoming release.

“A moderation in energy and other commodity costs would go a long way to making the Fed’s job easier to control inflation expectations,” Porter said. “In turn, this could reduce recession risks by removing some of the pressure on consumers.” Yet while the economist says the headline inflation rate in Wednesday’s CPI report could fall back below 9% after topping that level in June, it will take several months to bring inflation back significantly higher. down.

For investors, this means: staying on the defensive. This could include focusing on stocks in the best inflation-proof sectors such as healthcare, consumer staples and utilities. Beverage stocks are also surprisingly good names to buy, not just for inflation protection, but also for dividends. And for those who want to spread their risk, consider these 10 defensive exchange-traded funds (ETFs) that could provide some ballast for the choppy waters ahead.

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