US stocks slump after jobs data

·3 min read
The US economy added a better-than-expected 379,000 jobs in February

US stocks slumped further Friday -- with the tech-heavy Nasdaq falling into correction territory -- as strong jobs numbers added to interest rate fears.

The US economy added a better-than-expected 379,000 jobs in February, according to government data released Friday, while average hourly earnings rose only a modest 0.2 percent as analysts had forecast.

"There seems to be a little unease in the market as the positive labour update is a double-edged sword," said market analyst David Madden at CMC Markets UK.

"A healthier jobs market bodes well for the recovery but it will also probably bring about inflation pressure -– which has a track record of pushing up yields and hurting stocks."

Wall Street opened higher, but later fell back.

The Dow was 0.1 percent lower in late morning trading.

The tech-heavy Nasdaq Composite fell more than two percent, however, pushing it into correction territory -- or more than 10 percent lower than the record high it set just last month.

Tech firms are more sensitive to higher interest rates.

US stocks tumbled Thursday after US Federal Reserve boss Jerome Powell failed to soothe fears of a surge in inflation which many worry could force the US central bank to hike interest rates earlier than previously thought.

That prospect pushed the dollar to three-month highs versus the euro on Friday and undermined shares in Asia and in morning trading in Europe.

Powell on Thursday reiterated that the Fed would not tighten policy until its goals of full employment and consistent inflation had been met -- and that was likely to be some time away.

Traders were also left disappointed that Powell did not indicate he would act to ease the recent rise in bond yields, and the yield on benchmark 10-year US Treasuries spiked back above 1.5 percent to a one-year high after his comments.

Yields rise as bond prices fall -- and investors are rushing out of them as inflation would eat into their returns.

While the rollout of coronavirus vaccines, slowing infections, easing of lockdowns and an imminent new US stimulus are breathing life back into economies, investors are increasingly worried that ultra-loose monetary policies -- a key pillar of a year-long equity surge -- will be wound down if inflation spikes.

This has led to a sharp sell-off across world markets.

"The market doesn't believe what the Fed is selling," said market analyst Stephen Innes at Axi.

"The Fed won't be able to put the rate hike genie back in the bottle anytime soon," he added.

Meanwhile, oil prices also struck fresh 14-month peaks above $69 per barrel following Thursday's surprise decision by OPEC and its major allies to maintain most output cuts until April.

"The surge in oil prices... will have done little to stem the mounting alarm over rising prices," noted AJ Bell investment director Russ Mould.

- Key figures around 1630 GMT -

New York - Dow: DOWN 0.1 percent at 30,880.71 points

EURO STOXX 50: DOWN 1.0 percent at 3,669.38

London - FTSE 100: DOWN 0.3 percent at 6,630.52 (close)

Frankfurt - DAX 30: DOWN 1.0 percent at 13,920.69 (close)

Paris - CAC 40: DOWN 0.8 percent at 5,782.65 (close)

Tokyo - Nikkei 225: DOWN 0.2 percent at 28,864.32 (close)

Hong Kong - Hang Seng: DOWN 0.5 percent at 29,098.29 (close)

Shanghai - Composite: FLAT at 3,501.99 (close)

Euro/dollar: DOWN at $1.1909 from $1.1967 at 2200 GMT

Pound/dollar: DOWN at $1.3806 from $1.3894

Euro/pound: UP at 86.27 pence from 86.12 pence

Dollar/yen: UP at 108.25 yen from 107.95 yen

Brent North Sea crude: UP 3.0 percent at $68.75 per barrel

West Texas Intermediate: UP 2.8 percent at $65.59 per barrel