U.S. stocks mixed after June slowdown in jobs growth as S&P 500 struggles to avoid 3rd-straight drop

What’s driving markets

U.S. stocks were mixed on Friday after data showed the U.S. created 209,000 new jobs in June, the smallest increase in more than two and a half years.

The data were taken as a sign that the Fed’s interest-rate hikes were finally starting to cool the labor market, but other details of the report suggested that the Fed would still face pressure to continue raising interest rates.

See: Jobs report shows 209,000 gain in June. Smallest increase since end of 2020

Still, the jobs number was notable in that it marked the first time in more than a year that the pace of job creation had underwhelmed economists’ expectations, according to an analysis from Bespoke Investment Group emailed to MarketWatch.

“With today’s weaker-than-expected report, the record run of better-than-expected NFP reports ended at 14,” the team said in a note shared with clients and MarketWatch on Friday.

The data painted a starkly different picture of the state of the U.S. labor market than a report on private payrolls growth from ADP released on Thursday, which had suggested that the private sector had created nearly 500,000 jobs last month.

In assessing the market’s reaction, analysts noted that expectations for a Fed rate hike in July were almost unchanged, according to the CME’s FedWatch tool, which assessed a more than 90% chance of a hike.

“It’s not a game-changer,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, during a phone call with MarketWatch.

Investors may already be looking past Friday’s report, Nolte said, toward the upcoming release of the June consumer-price index, which is due out Wednesday.

“We’ve got that inflation data point and earnings to get through before the Fed meeting later this month,” he added.

Analysts also focused on the pace of growth in average hourly wages, which increased by 0.4% in June, faster than economists had expected.

This suggests wage growth, a key input for inflation, is still too hot for the Fed’s liking, said Steve Wyett, chief investment strategist at BOK Financial, in emailed commentary.

“The Fed is not further behind on policy, but they still have work to do,” he said.

The yield on the 2-year Treasury
TMUBMUSD02Y,
4.914%
dropped back below 5% and was down four basis points at 4.969%. The yield on the 10-year Treasury note was little-changed at
TMUBMUSD10Y,
4.038%
4.044%.

U.S. stocks have started the second half of 2023 with a pullback, as all three major U.S. equity indexes are headed for a weekly loss. Still, the S&P 500 remains within striking distance of a 14-month closing high from Monday’s session, as the index has risen nearly 15% since the start of the year, according to FactSet data.

Companies in focus

• Levi Strauss & Co. shares
  LEVI,
  -6.54%
  fell after the jeans maker lowered its outlook for the year, stressing that the bulk of its inventory problems were behind it, but cited lower-than-expected revenue and margin, as well as FX for the cut.

• Costco Wholesale Corp.
  COST,
  -1.51%
  dropped after the retailer’s June sales edged higher, but comparable-store sales fell 1.4%, including a 2.5% drop for U.S. same-store sales.

• Nikola Corp. stock
  NKLA,
  +4.50%
    fell after the EV maker said its shareholder meeting was adjourned until Aug. 3 after failure to secure support for a plan to issue new stock.

• Shares of Rivian Automotive Inc.
  RIVN,
  +9.90%
  rallied Friday, and were headed for an eighth straight gain, after Wedbush analyst Dan Ives boosted his share-price target by 20%

• Alibaba Group Holdings Ltd.
  BABA,
  +6.92%
  shares rose after Reuters reported that Chinese authorities will announce a fine of at least 8 billion yuan ($1.1 billion) , possibly by Friday on its Ant Group arm, ending a lengthy regulatory overhaul.