Investing.com — The Dow notched a weekly win Friday despite slipping into the red into close as a stronger monthly jobs report reaffirmed bets for the Federal Reserve to front-load rate hikes to slow inflation.
The U.S. economy added 327,000 new jobs in June, well above consensus for 268,000 new jobs in June, while the unemployment rate was unchanged at 3.6%. Average hourly earnings slowed to 0.4% from 0.3% a month earlier
The participation rate, the number of people entering the jobs market, fell 0.1%. This suggests “the supply of labor will continue to be constrained…and the wage pressure that has been building up doesn’t look like it’s going to abate anytime soon,” Dean Smith, chief strategist and portfolio manager at FolioBeyond said in an interview with Investing.com on Friday.
The strong report, Morgan Stanley said, offers support “for a 75 basis point hike at the July FOMC.”
Treasury yields jumped following the report with the 10-year rising back above 3%. Growth sectors of the market like consumer discretionary were under pressure, though Tesla and homebuilders added support.
Tesla (NASDAQ:TSLA) was up more than 2% after the electric vehicle maker sold a record number of EVs in China in the second quarter.
Housing stocks including PulteGroup (NYSE:PHM), DR Horton (NYSE:DHI) and Lennar Corporation (NYSE:LEN), which have been battered by worries about demand as mortgage rates jump were also among the top gainers
“Our second quarter results demonstrate the power of our strategy, which continues to support strong revenue growth and margin expansion,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co.
Twitter (NYSE:TWTR), meanwhile, was also a drag on tech following a report that Elon Musk’s $44 billion take-private deal is in “serious jeopardy” as the billionaire remains wary about fake accounts on the social media platform. It fell nearly 5%.
Musk’s reluctance to move forward with the deal has many speculating that the billionaire is angling for a cut-price deal to acquire the company.
“The Twitter soap opera is clearly coming to some sort of finale over the coming months as Musk makes the decision to stay (with a lower price) or go,” Wedbush said, adding that the odds of the deal proceeding at the $54.20 a share price is about 5%.
In other news, GameStop (NYSE:GME) fell 5% after the video game retailer said it has fired its chief financial officer, Mike Recupero, and is laying off staff across the company as it looks to execute a turnaround plan.
The broader market’s rally this week was helped by hopes that recent economic data pointing to softening in the economy would persuade the Fed to consider a less hawkish path, but Smith warns that those bets are premature. The fight against inflation is still in “earning innings and there’s still a lot of work for the Fed to do,” Smith added. “People who bought the rally in the last couple of weeks are going to be really unhappy.”