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Wall Street is falling, setting the stage for losses for the ASX

Wall Street is falling, setting the stage for losses for the ASX
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Employers added 263,000 jobs last month. That’s a slowdown from July’s hiring pace of 315,000, but it’s still more than the 250,000 that economists had been expecting.

Also discouraging for investors was that the unemployment rate improved, partly for the wrong reasons. Among those who are not working, fewer than usual are actively looking for jobs. This is the continuation of a longstanding trend that could keep upward pressure on wages and inflation.

“We’re not over the hill yet, but should be getting closer as the impact of aggressive policies begins to take hold,” said Matt Peron, research director at Janus Henderson Investors.

By raising interest rates, the Fed hopes to slow down the economy and the job market. The plan is to starve the inflation of the purchases needed to push prices even higher. The Fed has already seen some impact, with higher mortgage rates hurting the housing industry in particular. The risk is that if the Fed goes too far, it could plunge the economy into recession. Meanwhile, higher interest rates depress prices for stocks, cryptocurrencies, and other investments.

“Everything depends on inflation at this point,” said Peter Essele, head of portfolio management at the Commonwealth Financial Network. “We think it will ease over the next few quarters.”

Overall, many investors see Friday’s jobs data as keeping the Fed on track to raise its federal funds rate by three-quarters of a percentage point next month. It would be the fourth such increase, three times the usual amount and bringing the rate to a range of 3.75 percent to 4 percent. The year started practically from scratch.

Crude oil, meanwhile, posted its biggest weekly gain since March. Benchmark US crude rose 4.7 percent to trade at $92.64 a barrel on Friday. Brent crude, the international standard, rose 3.7 percent to $97.92.

They have shot higher because major oil-producing countries have pledged to cut production to keep prices high. That should keep inflation under pressure, which is still near a four-decade high but is hopefully moderating.

The rise in crude oil prices helped oil company stocks be among the few on Wall Street to rise on Friday. Oilfield services company Halliburton rose 2 percent.

Technology stocks performed in the opposite direction. They were among the hardest-hit investments by this year’s rising rates, hurting the most in investments viewed as the riskiest, most expensive, or those holding investors the longest for big growth.

Microsoft slumped 5.1 percent and Amazon 4.8 percent.

All in all, more than 90 percent of stocks in the S&P 500 closed lower on Friday. The index fell 104.86 points to 3,639.66. It ended up 1.5 percent up for the week, its first weekly gain in four weeks.

The Dow fell 630.15 points to 29,296.79 while the Nasdaq lost 420.91 points to close at 10,652.40.

Smaller company shares also fell more sharply. The Russell 2000 Index fell 50.36 points, or 2.9 percent, to 1,702.15.

Aside from higher interest rates, the next hammer to hit stocks could be a potential decline in corporate earnings, analysts say. Businesses are struggling with high inflation and interest rates eroding profits while the economy slows.

Advanced Micro Devices fell 13.9 percent after warning that sales for the most recent quarter are expected to be $5.6 billion ($7.6 billion), below its previous guidance range of 6 .5 to 6.9 billion US dollars. AMD said the market for PCs weakened significantly during the quarter, impacting sales.

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Levi Strauss fell 11.7 percent after cutting its financial guidance for its fiscal year. It cited the US dollar’s rising value against other currencies, which is weakening the dollar value of overseas sales, and a more cautious outlook on the economies of North America and Europe.

Government bond yields rose immediately after the jobs report was released, although they have fluctuated somewhat thereafter. The yield on the 10-year government bond, which helps set interest rates on mortgages and other loans, rose to 3.88 percent from 3.83 percent late Thursday.

The two-year yield, which is more in line with expectations for the Fed’s actions, rose to 4.30% from 4.26%. Earlier in the morning it climbed over 4.33 percent and was near its highest level since 2007.

AP

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