Market Snapshot: U.S. stocks close mostly lower as robust July jobs report stokes worries over Fed rate hikes

What drove markets?

Stocks mostly fell Friday after a surprisingly strong jobs report worried investors that the Federal Reserve may need to keep up its aggressive interest rate hikes to the cool economy and tame inflation.

“It puts 75 basis points squarely on the table for the Fed in September,” said Jim Baird, chief investment officer of Plante Moran Financial Advisors, in a phone interview Friday, referring to market expectations for another large rate hike at the central bank’s next meeting. The jobs report “ups the ante for the Fed and puts them in a position where it should be an easy call for them to continue to tighten.”

Read: A red-hot July jobs number has traders penciling in another jumbo Fed rate hike

The U.S. economy added 528,000 jobs in July, the Labor Department reported Friday, far exceeding the 258,000 consensus estimate. The unemployment rate ticked down to 3.5%, matching the lowest level since the late 1960s, while average hourly earnings climbed 15 cents, or 0.5%, to $ 32.27.

Announcements of layoffs by a number of high profile companies had earlier raised concerns that a robust labor market may be softening.

Friday’s jobs data triggered a sharp rise in U.S. Treasury yields and a lower stock-market opening as investors priced in prospects of further jumbo-sized rate hikes by the Federal Reserve.

Some analysts argue that the strong jobs data reinforces the idea that the economy can withstand aggressive Fed monetary tightening without falling into recession. Sharp falls in commodity prices, including oil, have meanwhile helped support the idea that inflation may be near a peak.

Fed-funds futures traders priced in a 66.5% chance of a 75 basis point rate hike in September, up from 34% on Thursday. Traders see a 33.5% probability of a 50 basis point move when the Fed next meets on September 20-21.

“The economy is clearly firing on all cylinders as this morning’s job report showed growth across all sectors. The release should quiet the bears in the room who have been crying recession in recent days,” said Peter Essele, head of portfolio management at Commonwealth Financial Network.

“Strong jobs growth and moderating price inflation should help extend the current relief rally through the end of the year,” he said in emailed comments.

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The monthly employment report, however, is a lagging indicator. And investors and policy makers still have lots of data to sift through between now and the Fed’s September policy meeting. The next reading of the U.S. consumer-price index will be released next week.

“Friday’s extremely strong jobs data suggests that many businesses are not allowing recession fears to stand in the way of hiring,” said Ryan Belanger, managing principal and founder at Claro Advisors. “The jury is out on whether this robust pace of hiring can continue as many large and small companies have recently taken steps to slow hiring or even layoff existing employees.”

“We believe next Wednesday’s Consumer Price Index data will weigh more heavily on Federal Reserve policy than Friday’s jobs report, as fighting inflation is the Fed’s top focus,” Belanger said in emailed comments.

Meanwhile, investors wrapped up another busy week of corporate earnings. Investors have largely viewed results as better than feared, providing another source of support for equities.

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More than 80% of S&P 500 index companies have now reported for the second quarter earnings season, and so far profits are up 8.6%, on a blended basis according to Refinitiv.

“We’ve got most of the second-quarter earnings out of the way now,” said Chris Iggo, chief investment officer at AXA Investment Managers, by phone Friday. “There’s not been any real disasters.”

On the global front, geopolitical tensions remain an undercurrent for markets. China conducted “precision missile strikes” Thursday in waters off Taiwan’s coasts as part of military exercises that have raised tensions in the region to their highest level in decades following a visit by U.S. House Speaker Nancy Pelosi to the island.

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Which companies were in focus?

• Tesla Inc. TSLA, -6.63% shareholders on Thursday approved a proposal expected to lead to a 3-for-1 stock split and sided with the company on most of the proposals up for a vote. Shares dropped 6.6%.
• Meme-stock favorite AMC Entertainment Holdings Inc. AMC, +18.86% late Thursday announced a special dividend in the form of “Ape” preferred shares. AMC shares jumped 18.9%.
• Shares of Twilio Inc. TWLO plunged 13.5% after the software company’s outlook came in below Wall Street expectations following a reported beat in the previous quarter.
• DoorDash Inc. DASH, -1.32% shares fell 1.3% after the company late Thursday reported continued growth in the second quarter, saying that its food-delivery business remains healthy despite economic uncertainty, though its loss was worse than what Wall Street expected.
• Shares of Cloudfare Inc. NET, +27.06% soared 27.1% after the cybersecurity company reported results late Thursday that topped Wall Street expectations and hiked its revenue outlook for the year.
• Beyond Meat Inc. BYND, +21.89% shares surged 21.9% after UBS raised its price target. Shares had tumbled in early trade after the maker of plant-based meat substitutes posted on Thursday afternoon a larger-than-expected net loss and smaller-than-expected revenues, while announcing layoffs.
• Block Inc. SQ, -2.20% shares edged down 2.2% after the payment-technology company late Thursday swung to a loss and projected that July volume growth for the Square seller business would be lower than what was expected in the second quarter when looking on a year-over-year basis.
• Carvana Co. CVNA, +40.07% shares skyrocketed 40.1% even as the used-car retailer missed expectations with its second-quarter revenue and logged a larger loss than analysts were anticipating. The company reported second-quarter sales volume of 117,564, up from 105,185 the previous quarter and 107,815 a year earlier. Shares are down almost 80% this year.

How did other assets fare?

• The yield on the 10-year Treasury note TMUBMUSD10Y, 2.834% jumped 16.4 basis points to 2.838%. Yields and debt prices move opposite each other.
• The ICE U.S. Dollar Index DXY, +0.84%, a measure of the currency against a basket of six major rivals, rose 0.8%.
• Bitcoin BTCUSD, +1.01% was trading up 1.7% at $ 22,888.
• In oil futures CL.1, -0.01%, West Texas Intermediate crude for September delivery CLU22, -0.01% rose 0.5% to settle at $ 89.01 a barrel. The U.S. benchmark slid 9.7% for the week.
• Gold futures GC00, -0.80% ended lower Friday, with gold for December delivery GCZ22, -0.80% falling 0.9% to finish at $ 1,791.20 an ounce. Based on the most-active contract, the yellow metal gained 0.5% for the week, according to Dow Jones Market Data.
• In European equities, the Stoxx Europe 600 SXXP, -0.76% closed 0.8% lower Friday for a weekly loss of 0.6%. London’s FTSE 100 UKX, -0.11% edge down 0.1% Friday, trimming its small weekly gain to 0.2%.
• The Shanghai Composite SHCOMP, +1.19% ended with a gain of 1.2% Friday, but remained down 0.8% for the week. The Hang Seng Index HSI, +0.14% in Hong Kong rose 0.1% Friday, bringing its weekly rise to 0.2%. Japan’s Nikkei 225 NIK, +0.87% gained 0.9% Friday and climbed 1.3% for the week.

The Associated Press contributed to this article.