Persistent Interest Rate Worries Lead To Sell-Off On Wall Street

(RTTNews) - With worries about higher interest rates continuing to weigh on Wall Street, stocks moved sharply lower during trading on Friday. The major averages added to the losses posted on Wednesday and Thursday, further offsetting the substantial recovery rally seen to start the week.

The major averages climbed off their lows of the session going into the close but still posted steep losses. The Dow tumbled 630.15 points or 2.1 percent to 29,296.79, the Nasdaq plummeted 420.91 points or 3.8 percent to 10,652.40 and the S&P 500 plunged 104.86 points or 2.8 percent to 3,639.66.

Despite closing lower for three straight sessions, the major averages closed higher for the week due to the sharp gains on Monday and Tuesday. The Dow surged by 2.0 percent, the S&P 500 jumped by 1.5 percent and the Nasdaq climbed by 0.7 percent.

The sell-off on Wall Street came following the release of the Labor Department's closely watched monthly jobs report, which failed to ease concerns about the outlook for interest rates.

The report showed U.S. job growth slowed in the month of September but still came in slightly stronger than economists had anticipated.

The report showed non-farm payroll employment jumped by 263,000 jobs in September after surging by an unrevised 315,000 jobs in August and spiking by an upwardly revised 537,000 jobs in July. Economists had expected employment to leap by 250,000 jobs.

The slightly stronger than expected job growth reflected notable increases in employment in the leisure and hospitality and healthcare sectors, which added 83,000 jobs and 75,400 jobs, respectively.

Economists noted the job growth was even stronger excluding a drop in state and local government education payrolls, which reflected shifting seasonal patterns in teacher hiring.

The Labor Department also said the unemployment rate dipped to 3.5 percent in September from 3.7 percent in August, while economists expected the unemployment rate to come in unchanged.

The unemployment rate matched its lowest level since just before Covid-19 lockdowns began to take effect in February of 2020, which was also matched in July. Unemployment has not been lower in over fifty years.

"The drop in the unemployment rate back to a cycle low underscores that the labor market remains extremely tight," said Kathy Bostjancic, Chief U.S. Economist at Oxford Economics. "The Fed will view the jobs report as a reason to continue its aggressive pace of tightening."

Treasury yields advanced following the release of the report, with the yield on the benchmark ten-year note moving higher for the third straight session.

A sales warning from Advanced Micro Devices (AMD) also weighed on the markets, with the chipmaker plummeting by 13.9 percent.

AMD warned of third quarter revenue well below its previous guidance due to a weaker than expected PC market and significant inventory correction actions across the PC supply chain.

Sector News

Semiconductor stocks helped lead the markets lower following the warning from AMD, dragging the Philadelphia Semiconductor Index down by 6.1 percent.

The warning also contributed to considerable weakness among computer hardware stocks, resulting in a 4.2 percent plunge by the NYSE Arca Computer Hardware Index.

Substantial weakness was also visible among gold stocks, as reflected by the 4.6 percent nosedive by the NYSE Arca Gold Bugs Index.

The sell-off by gold stocks came amid a decrease by the price of the precious metal, with gold for December delivery falling $11.50 to $1,709.30 an ounce.

Networking, airline, retail and biotechnology stocks also showed notable moves to the downside amid broad based weakness on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.7 percent, while Hong Kong's Hang Seng Index dove by 1.5 percent.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index edged down by 0.1 percent, the French CAC 40 Index slumped by 1.2 percent and the German DAX Index tumbled by 1.6 percent.

In the bond market, treasuries moved lower for the third consecutive session amid lingering interest rate worries. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.7 basis points to 3.883 percent.

Looking Ahead

Next week's trading is likely to be driven by reaction to the latest inflation data, while reports on retail sales and consumer sentiment may also attract attention.

Traders are also likely to keep an eye on earnings news from financial giants Citigroup (C), JPMorgan Chase (JPM), Morgan Stanley (MS) and Wells Fargo (WFC).