Major stock averages fall for third week, Nasdaq posts six-day losing streak

Runway numbers don't indicate a soft landing, says Roger Ferguson

US stocks fell Friday to cap their third consecutive weekly decline, after a solid jobs report in August did not allay fears that the Federal Reserve would continue to raise interest rates aggressively to fight inflation.

After rallying in the morning, the Dow Jones Industrial Average wiped out a gain of 370 points, closing the session at 337.98 points, or about 1.1%, at 31,318.44. The S&P 500 fell about 1.1% to 3,924.26, its lowest close since July. The Nasdaq Composite fell 1.3% to 11,630.86 and recorded its first six-day losing streak since 2019.

All major averages were lower to close out the week, making it their third negative week in a row after a dip in the last days of August. The Dow and S&P lost about 3% and 3.3% respectively, while the Nasdaq lost 4.2%.

“There is still a lot of nervousness about what we will see in the coming months,” said Callie Cox, US investment analyst at eToro. “Yes, inflation and the labor market are rebalancing, but at what price? Markets are still figuring that out.”

“To make matters worse, the S&P 500 is trapped in the danger zone — below the three major moving averages,” she added. “Those moving averages served as floors until a few weeks ago. Now they seem like ceilings that the index can’t get through. The mood has definitely changed. While we may not be retesting the lows of this sell-off, we won’t be testing new ones anytime soon. reach peaks.”

Stocks were hit hard this week by aggressive comments from Federal Reserve officials indicating that rate hikes won’t go away anytime soon. That puts traders on guard against a retest of the June lows, especially knowing that September has been a bad month for the market historically. Some have suggested that if the S&P 500 fails to hold the 3,900 level, those summer lows could come back into play.

Some investors were comforted on Friday by the much-anticipated jobs report, which showed the economy added 315,000 jobs this month, just below the Dow Jones estimate of 318,000. Shares rose in the early part of the day.

The unemployment rate rose to 3.7%, two tenths of a percentage point higher than expected. The August report is especially important because it is one of the last major economic reports the Fed will weigh before raising rates at its September meeting. This data point could help the central bank determine whether a 75 basis point increase is possible.

The latest major economic report is the August CPI on September 13 and will likely determine how aggressive the Fed should be in the near term.

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