Wall Street ends lower as jobs data may bring rate hike sooner

Yesterday I mentioned that if the bad jobs report came in today as expected, it would probably give the market a boost.  I should have added that if it was a good report, we could expect another big sell-off.  Today's jobs report was in fact exceptionally good and Wall Street responded in kind with a major plummet to the tune of  279 points.  Investors were hoping for no more than 240,000 new jobs in order to quell interest rate fears.  The actuals came in at 295,000 or 55,000 more jobs than forecast, and this sent the market into a panic.  As Fortune magazine noted, "A strong jobs report is supposed to be good news, but investors did not appear to get that memo Friday, as U.S. stocks suffered a broad sell-off."  Though the Fed has been quite consistent in its position that there would be no interest rate hikes until the economy was on very solid ground and, even then, they would be small and gradual, investors just don't seem to want to believe this.  And today had the additional wrinkle that, due to the very strong report, unemployment is now down to 5.5 percent, a full 0.2 percent drop from January, and the watershed level at which the Fed has always said that it might take action.  So the 5.5% reported today, the lowest in ten years and the official definition of "full employment," was not good news for investors, yet another irrational case where good news for the economy translated to bad news for stocks.  Every one is now on pins and needles awaiting next week's Fed meeting.  It doesn't seem to matter that the Fed recognizes that there are still too many Americans underemployed and that action will not be taken until that issue is resolved.  Other really good news is that Apple finally reached its own watershed moment, today becoming so large that it was dropped from the Nasdaq and added to the Dow, with longtime icon AT&T being dropped from the Dow to make room.  Predictably Apple's shares rose and AT&T's fell.  Volume was robust and considerably above recent averages at 7.2 billion.  

Wall Street ends lower as jobs data may bring rate hike sooner

BY SINEAD CAREW

NEW YORK Fri Mar 6, 2015 6:49pm EST

DJ:     17,856.78  -278.94     NAS:    4,927.37  -55.44      S&P:   2,071.26  -29.78

(Reuters) - U.S. stocks closed lower on Friday and the S&P 500declined for a second straight week after a strong monthly jobs report as investors bet that the Federal Reserve could raise interest rates sooner than previously expected.

Some of the worst-hit stocks were utilities and real estate investment trusts as they are high-yielding investments which would look less attractive after a rate hike.

The S&P and the Dow, which accelerated their declines as the day wore on, were under additional pressure because they had hit records earlier in the week after a strong February.

U.S. nonfarm payrolls rose 295,000 last month, topping estimates for a gain of 240,000, after a downwardly revised 239,000 increase in January. The unemployment rate fell to 5.5 percent from 5.7 percent in January.

The strong report, seen as a gauge for the timing of the Fed's first rate hike in years, may put pressure on the Fed to move soon, said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

"You have to think that report makes the likelihood of a June rate increase somewhat higher," said Frederick.

The S&P extended its losses as the session wore on having found little support after it fell below its two-week intraday low, according to Frank Cappelleri, technical market analyst at Instinet, a Nomura company, in New York.

The Dow Jones industrial average .DJI fell 278.94 points, or 1.54 percent, to 17,856.78, theS&P 500 .SPX lost 29.78 points, or 1.42 percent, to 2,071.26 and the Nasdaq Composite.IXIC dropped 55.44 points, or 1.11 percent, to 4,927.37.

For the week, the S&P 500 fell 1.6 percent while the Dow slid 1.5 percent and the Nasdaq dropped 0.7 percent. The S&P and the Dow both ended the day more than 2 percent lower than their March 2 records. The S&P saw its biggest percentage decline since early January on Friday.

In a shakeup of the Dow Jones industrial average, Apple Inc (AAPL.O), the largest U.S. company by market value, will join the index this month, replacing AT&T Inc (T.N). Apple shares rose 0.15 percent at $126.60 after rising as high as $129.37 while AT&T fell 1.5 percent to $33.48.

"If anything, what that should do is cause the Dow to be more volatile," said Schwab's Frederick, because the Dow is a price-weighted index and Apple has a higher share price than AT&T.

The utilities sector .SPLRCU was the worst performing S&P 500 sector with a 3.1 percent decline and the Dow Jones Equity Reit Index .DJR finished off 3.2 percent.

About 7.2 billion shares changed hands on U.S. exchanges, compared with the 6.4 billion average for the last five sessions, according to data from BATS Global Markets.

Declining issues outnumbered advancing ones on the NYSE by 2,683 to 438, for a 6.13-to-1 ratio on the downside; on the Nasdaq, 1,926 issues fell and 840 advanced for a 2.29-to-1 ratio favoring decliners.

The benchmark S&P 500 index posted 13 new 52-week highs and four new lows; theNasdaq Composite recorded 67 new highs and 47 new lows.