Dow Rises on Energy, Banks Gain After Blowout Jobs Dent Tech By Today’s Stock Market

Through Yasin Ebrahim — A surge in banking and energy companies helped the Dow end the day higher on Friday, but rising Treasury yields in the wake of a disastrous employment data hurt tech, which restrained gains in the overall market.

The Sandamp;P 500 dropped 0.18%, the Nasdaq was down 0.50%, and the Dow Jones Industrial Average increased by 0.23%, or 76 points.

While the unemployment rate surprisingly dropped to 3.5%, the U.S. economy unexpectedly added 528,000 new jobs in July, above expectations of 250,000 new positions in June.

The jobs report also signaled an increase in pay pressures that will probably keep inflation high and allow the Federal Reserve permission to maintain front-loading interest rate increases.

The Federal Reserve’s peak interest rate, or the so-called terminal rate, is currently at 3.6%, but given the robust job market, traders are betting that this won’t be enough to contain inflation, according to Jefferies.

Currently, the terminal rate appears to be severely inadequately priced into the curve. Until the funds rate reaches 4-4.25%, the Fed will likely continue raising rates through Q123, according to Jefferies.

David Keller, chief market strategist at StockCharts, told in an interview on Friday that if the Fed adopts a more hawkish stance than anticipated, the market will view that as a significant negative because it is currently pricing in a Fed funds rate that is closer to the end of cycle.

The two-year U.S. Treasury yields, which are affected by Fed rate increases, increased to their highest point in almost two months. The yield on 10-year bonds increased by more than 6% as well.

The market’s growth segments, which are often unfavorable in a rising rate environment, were severely hit, with consumer discretionary and major tech firms leading the fall.

After shareholders approved the company’s planned 3-for-1 stock split, Tesla (NASDAQ: TSLA) led the decline in consumer stocks, falling 6%.

Energy increased by 2% to offset some of the losses from the previous day as oil prices increased as concerns about a recession harming demand subsided in the wake of the more positive jobs data.

Meanwhile, financials were pushed higher by banking stocks, particularly JPMorgan Chase and Co (NYSE: JPM), since rising rates often enhance lending margins.
On the profits front, however, there were mixed quarterly reports, with LYFT standing out the day after stronger than anticipated earnings.
The ride-hailing business LYFT (NASDAQ: LYFT) saw a 16% increase after reporting a surprise quarterly profit as demand increased to pre-pandemic levels.

AMC Entertainment (NYSE: AMC) reported a slightly larger-than-anticipated quarterly loss and disclosed that it will distribute a dividend in the form of preferred shares to all common shareholders. Its stock increased by almost 19%.

According to Wedbush, the action effectively splits the shares in half, with half being listed under the stock tickers “AMC” and “APE.”

Despite producing quarterly earnings that beat on both the top and bottom lines, Block (NYSE: SQ) saw a 2% fall as a 34% decline in bitcoin revenue restrained growth.