The Dow Jones Industrial Average closed down more than 600 points, losing 2.11%, while the S&P 500 fell 2.8% and the Nasdaq Composite lost 3.8% in value, Investors are betting that the Fed’s fight against inflation will continue apace.
The MSCI World Stock Index, which tracks stocks from 45 nations, fell 2.45%.
The US Labor Department said nonfarm payrolls rose by 263,000 in September – slightly above expectations – and the unemployment rate fell to 3.5%, below forecasts.
The data reinforced the view that the Fed and other global central banks still have some way to go before easing their tightening cycles, after stocks surged earlier in the week on hopes that such a pivot can be on the way.
“Today’s jobs data did little to change the narrative of a Fed committee that has been intensely focused on bringing inflation down,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “The timing of the Fed’s pivot away from an aggressive policy stance is proving difficult, and current labor market conditions are certainly not helping the situation.”
The likelihood of a continued rise in interest rates helped push the dollar and Treasury yields higher once again. The Dollar Index, which tracks the greenback against a basket of six currencies, rose 0.47%, and the yield on 10-year Treasury bills climbed 5.9 basis points to 3.881% .
Markets are currently pricing in a 92% chance of a 75 basis point hike at next month’s Federal Open Market Committee meeting.
Investors will now turn their attention to quarterly corporate results which will begin next week, as well as the latest monthly US inflation figures released on Thursday.
“The negative market reaction may be a sign that investors are processing the likelihood that there is no change in the Fed’s aggressive playbook in the near term,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley’s global investment office. “Keep in mind that the next Fed decision isn’t until early November, so a lot more data will have to be digested, not the least of which next week’s inflation gauge.”
Crude oil continued to benefit from the supply cuts announced by OPEC+ to reach its highest level in five weeks, dismissing fears of an economic slowdown.
Brent crude oil closed up 3.7% at $97.91 a barrel and the price of US crude oil rose 4.73% at $92.63 a barrel.
Elsewhere, gold was hit by the stronger dollar, with spot prices falling 0.9% to $1,695.52 an ounce.