Stock market today: Wall Street is mixed after jobs report comes in warm but hopefully not too hot

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Traders work on the floor at the New York Stock Exchange in New York. Credit: AP

Wall Street is holding relatively steady Friday after data suggested the U.S. job market is still warm enough to keep the economy growing but maybe not so hot that it stokes inflation much higher.

The S&P 500 was little changed in late morning trading. The Dow Jones Industrial Average was down 61 points, or 0.2%, at 33,860, as of 11:20 a.m. Eastern time, and the Nasdaq composite was 0.2% higher.

A lot is riding on whether the economy can navigate the narrow pathway to avoid a long-predicted recession. It needs to keep growing despite much higher interest rates instituted by the Federal Reserve to bring down inflation. But it can’t grow so quickly that the Fed feels pressure to brake much harder on the economy to prevent inflation from spiraling higher.

Friday’s report showed U.S. employers added 209,000 jobs last month, a slowdown from May’s hiring of 306,000. Perhaps more importantly, it wasn’t far off economists’ expectations. That’s unlike a report from Thursday, which sent stocks dropping after it suggested U.S. hiring could be much stronger than expected.

Besides the slowdown in overall hiring, some numbers underneath the report’s surface also showed some loosening in the job market. More people are working part-time because their hours have been cut, for example, said Brian Jacobsen, chief economist at Annex Wealth Management.

“The job market is healthy, for now, but it’s not red hot,” he said.

That could keep the Federal Reserve on the course it’s been hinting at recently: perhaps two more increases this year before the Fed holds rates at a high level to ensure inflation returns to its 2% target. The wide assumption on Wall Street is the Fed will hike rates in three weeks at its next meeting.

Treasury yields were mixed following the much anticipated jobs data. The 10-year Treasury yield rose to 4.04% from 4.03% late Thursday. It helps set rates for mortgages and other important loans.

The two-year yield, which moves more on expectations for the Fed, fell to 4.92% from 5.00%.

Some concerning signals for inflation were also still embedded in the report.

Wage growth held steady last month, instead of slowing as economists expected, for example. While workers would rather have the 4.4% gain in average hourly earnings from a year earlier than the 4.2% that was predicted, Wall Street’s fear is the Fed will see too-strong wage growth as keeping upward pressure on inflation.

Yields are already around their highest levels since March, which was when high rates helped trigger three failures in the U.S. banking system that rattled confidence across financial markets. High rates have also caused pain in other areas of the economy, from manufacturing to housing.

Bank stocks were rising Friday amid relief that the jobs report wasn’t much stronger than expected, like Thursday’s more limited payroll report was. JPMorgan Chase rose 1% and was one of the strongest forces pushing upward on the S&P 500.

Smaller banks that have been under heavy scrutiny as Wall Street hunts for other potential weak links were also climbing. PacWest Bancorp gained 3%.

Stocks of smaller companies also rose more than the rest of the market. Not only do investors see them as moving more closely with the strength of the U.S. economy than big multinational companies, smaller stocks are also viewed as benefiting more from easier interest rates. The Russell 2000 index of smaller stocks rose 1.5%.

On the losing side of Wall Street was Levi Strauss, which tumbled 7% despite reporting slightly stronger profit for the latest quarter than analysts expected. It cut its forecasted range for earnings for the full year, as its U.S. wholesale business remains under pressure.

Costco Wholesale fell 1.3% after reporting its growth in sales slowed in June from May.

Higher yields are helping to pull the S&P 500 toward a loss of 0.8% for the week. That would be just its second losing week in the last eight.

In stock markets abroad, indexes continued to sink in China, where a recovery in the world’s second-largest economy is slower than hoped following the removal of anti-COVID restrictions. Hong Kong’s Hang Seng fell 0.9%, and stocks in Shanghai slipped 0.3%.

U.S. Treasury Secretary Janet Yellen was also in Beijing attempting to ease tensions between the world’s two largest economies.

Yellen is meeting with senior Chinese officials to try to soothe antagonism and promote global financial stability. Speaking with business people, she criticized China’s treatment of U.S. companies and new export controls on metals used in semiconductors, while defending U.S. controls on technology exports that irk Beijing, saying they’re needed for national security.

In Europe, stocks were mixed. Germany’s DAX returned 0.5%, and the FTSE 100 in London fell 0.3%.

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