Live Stock Market News Updates: Stocks Turn Red, Post-Jobs Report Loses Gains

US stocks fell sharply in afternoon trade, giving up all the gains from the post-jobs report rally ahead of the Labor Day weekend.

Near 1:20 PM ET, all three indexes were trading in red numbers after gaining more than 1% in late morning trading.

The S&P 500 fell 0.3%, the Dow fell about 0.3%, while the Nasdaq suffered sharp losses, falling 0.8%.

The market rally earlier indicated some investors’ optimism that a moderate 0.50% rate increase could come from the Federal Reserve later this month after the August jobs report showed moderate job growth last month, as expected.

Labor Department data released Friday morning showed that nonfarm payrolls grew by 315,000 in August while the unemployment rate rose to 3.7%.

Economists had expected job gains to total 298,000 with the unemployment rate expected to remain at 3.5%.

Wage gains eased somewhat last month, with average hourly earnings up 0.3% month over month and 5.2% from a year earlier. Both readings were 0.1% below expectations.

However, the highlight of Friday’s jobs data was the increase in participation, with 786,000 Americans entering the workforce last month and pushing the workforce participation rate to 62.4%, the highest level since March 2020.

Investors were focused on Friday’s data after Federal Reserve Chairman Jerome Powell asserted in a hawkish speech at a Jackson Hole seminar last week that he was willing to accept weaker business conditions in exchange for a cooling of prices.

“The slower pace of August payroll gains, combined with a significant recovery in the workforce, and a more modest increase in wages appear to favor a 50 basis point rate hike from the Fed next month, rather than a 75 basis point increase, but Officials will put more weight on August CPI data, which is due out the following week, Michael Pierce, chief US economist at Capital Economics, wrote in a note on Friday.

In addition to the stock market rally, the dollar was weakening on Friday – which is positive for risky assets – while Treasury yields moderated after a sharp rally earlier this week. The 10-year yield held near 3.21% in late morning trade, down from highs around 3.27% earlier this week.

Traders work on the floor of the New York Stock Exchange (NYSE) on September 1, 2022 in New York City. Shares rose in late afternoon trading on the first day of September as investors looked ahead to Friday’s jobs report. (Photo by Spencer Platt/Getty Images)

Shares of Lululemon (LULU) rose more than 11% in early trading after the sports apparel retailer reported quarterly earnings that beat Wall Street estimates. The company also raised its annual earnings and revenue guidance above analyst expectations as wealthy customers snapped up its new offerings of accessories. In the afternoon, Lululemon shares were up nearly 7%.

Shares of Broadcom (AVGO) also rose Friday morning after the chip maker provided a strong sales forecast for the current quarter, allaying fears of a dip in chip demand from a recession.

While some better-than-fear financial data this season helped support sentiment, several strategists recently sounded the alarm about impending earnings weakness.

According to Morgan Stanley’s Mike Wilson, while the first half of the year is dictated by Federal Reserve policy and tighter fiscal terms, the second half will be determined by earnings forecasts for next year.

“As a result, equity investors should focus on these risks, not the Fed, especially as we enter the weakest seasonal time of the year to review earnings, and inflation erodes further into margins and demand,” Wilson said.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed

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