Home Stock Market Dow Ends Week with Loss as Jobs Report Misses Estimates, Fed Rate Hike Remains Likely

Dow Ends Week with Loss as Jobs Report Misses Estimates, Fed Rate Hike Remains Likely

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The Dow Jones Industrial Average ended the week with a loss on Friday as traders evaluated a weaker-than-expected jobs report for June. While the report fell short of estimates for the first time in 15 months, it still fueled expectations that the Federal Reserve would proceed with a rate hike later this month.

The Dow Jones Industrial Average fell by 0.55%, or 187 points, while the Nasdaq declined by 0.13% and the S&P 500 dropped by 0.3%.

June Jobs Report Misses Expectations but Keeps Fed Hike in Play In June, the U.S. economy added 209,000 jobs, missing the expected 225,000 and marking a significant decline from the 306,000 jobs added in the previous month. This slower pace of job creation was the weakest since December 2020.

However, the report also revealed that average hourly earnings, indicating wage growth, rose by 4.4% in June, surpassing the estimated 4.2%.

While expectations for a rate hike in July remained intact, investors speculated that the cooling in the labor market would deter the Federal Reserve from further hikes beyond July. Morgan Stanley expressed this sentiment in a note, stating that the report supported their view that the incoming data would not meet the criteria for a September rate hike.

The 2-year Treasury yield dipped below 5%, while the 10-year yield held onto its gains.

Energy Stocks Rally, Defensive Sectors Retreat Energy stocks took the lead, driving the broader market higher as expectations of a less hawkish Federal Reserve eased concerns about a potential economic downturn and its impact on oil demand.

Companies like Halliburton Company, Diamondback Energy Inc, and Schlumberger NV experienced notable gains, with Schlumberger up more than 8%.

Defensive sectors, including consumer staples and utilities, faced significant losses. Walmart Inc and Costco Wholesale were among the contributors to the decline, with Costco reporting a 1.4% drop in comparable sales for June.

Levi Strauss Slashes Guidance amid Unfashionable Earnings Denim retailer Levi Strauss saw its shares fall by over 7% after cutting its annual earnings guidance. Although the company reported quarterly results that beat earnings expectations, its sales remained in line with estimates due to a decline in wholesale revenue.

Levi Strauss revised its guidance on adjusted diluted EPS for 2023, lowering it to a range of $1.10 to $1.20 from the previous range of $1.30 to $1.40. The company also adjusted its revenue growth projection to between 1.5% and 2.5% from the previous range of 1.5% to 3%.

Goldman Sachs reduced its price target on Levi Strauss stock from $15 to $14, attributing the pressure on U.S. wholesale to pricing adjustments following the growth achieved since pre-pandemic levels.

Rivian Automotive and Alibaba Show Strong Performances Rivian Automotive experienced a surge of over 14% after Wedbush upgraded its price target on the electric vehicle maker. The upgrade reflected increased confidence in Rivian’s ability to meet or exceed its delivery targets in the second half of 2023 and 2024.

This positive news followed Rivian’s report that it had delivered 12,640 vehicles in the second quarter, surpassing market estimates.

Alibaba’s stock rose by 8% as it moved closer to leaving regulatory scrutiny in China behind. This came after its affiliate, Ant Group, received a $984 million fine from authorities.

Looking Ahead: Focus on Consumer Inflation As the market concluded the week with losses, investor attention will turn to the inflation report scheduled for release next week. This report, which is the last major release before the Federal Reserve’s meeting on July 25-26, is expected to dominate investor sentiment.

Morgan Stanley predicts that core CPI will slow to 0.27% in June due to a significant drop in core goods inflation driven by used vehicles.

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Evie

Evie is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs.

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