The labor report pleased everyone very much with all three indexes jumping way up, the Dow up almost 400 in the morning, as the numbers came in very close to expectations, the most pleasing part being the increase in the unemployment rate to 3.7% showing that the labor market may be starting to loosen. Then all three indexes plunged dramatically right at noon which must have been right when the Russians announced that they would not be turning the gas back on to Europe tomorrow as expected and, worse, did not know when. This of course caused concern all over Europe, particularly Germany, over where their winter energy needs would come from and renewed panic throughout the markets completely negating all the good news over employment, inflation, and rate hikes.  

Russia’s move was not even on anybody’s radar with everyone optimistic this week over Europe’s energy situation – until all that got smashed to smithereens at noon today. Russia says they’ve found an oil leak in a vital turbine to deliver the gas to Europe via pipeline. It doesn’t sound like anything catastrophic but Russia’s inability to give a date for a fix threw everyone for a loop.  The Dow fell over 700 points to close down 337.  Another contributing factor to the big slide was the very thin volume of 9.95 billion heading into the long holiday weekend, which always exaggerates market moves. 

Fri  September 2, 2022  5:43 PM

Wall Street ends week on down note as jobs report gain fade

By Chuck Mikolajczak

DJ: 31,656.42  +145.99       NAS: 11,785.13  -31.08         S&P: 3,966.85  +11.85     9/1

DJ: 31,318.44  -337.98        NAS: 11,630.86  -154.26       S&P: 3,924.26  -42.59      9/2

NEW YORK, Sept 2 (Reuters) - U.S stocks closed out the trading week on a down note on Friday, as early gains from a jobs report that showed a labor market that may be starting to loosen gave way to worries about the European gas crisis.  Wall Street opened sharply higher after the August U.S. payrolls report showed stronger-than-expected hiring but a climb in the unemployment rate to 3.7% eased some concerns about the Federal Reserve being overly aggressive in raising interest rates as it attempts to bring down high inflation.  However, gains were erased after Gazprom (GAZP.MM), the state-controlled firm with a monopoly on Russian gas exports to Europe via pipeline which were due to restart on Saturday, said it could not safely restart deliveries until it had fixed an oil leak found in a vital turbine and did not give a new time frame. read more

"Definitely the afternoon overshadowing the good data from this morning, the afternoon has been stolen from us by those headlines out of Europe," said Zach Hill head of portfolio management at Horizon Investments in Charlotte, North Carolina.  Analysts also pointed to thin trading volumes ahead of the extended holiday weekend helping to exaggerate market moves.  "The setup is important, there has been some optimism around the European energy situation over the last week or so, long-dated power prices falling almost in half in some instances and signs that Germany had almost 80% of their storage full of gas, so what we are seeing is a little positioning adjustment against that backdrop coupled with a low liquidity Friday afternoon into a holiday weekend," said Hill.

The Dow Jones Industrial Average (.DJI) fell 337.98 points, or 1.07%, to 31,318.44; the S&P 500 (.SPX) lost 42.59 points, or 1.07%, to 3,924.26; and the Nasdaq Composite (.IXIC) dropped 154.26 points, or 1.31%, to 11,630.86.

Markets are closed on Monday for the Labor Day holiday.

Energy (.SPNY) was the only major S&P sector to end the session in positive territory, up 1.81%.

While payrolls topped expectations, average hourly earnings rose 0.3% compared with estimates of 0.4%, while the unemployment rate edged up to 3.7% from a pre-pandemic low of 3.5%, indicating that the Fed's efforts to front-load rate hikes were beginning to take effect. read more  Wage growth data is seen as important to the Fed's deliberations on increasing interest rates as the central bank looks to bring inflation, running at four-decades high, back to its 2% target. Expectations for a third straight 75 basis point hike from the central bank at its September meeting fell to 56%, according to CME's FedWatch Tool, down from 75% the day prior.

The focus now shifts to the August consumer price report due mid-month, the last major data available before the Fed's Sept. 20-21 policy meeting.  Fears of aggressive policy tightening have sent stocks lower after hitting a four-month high in mid-August, with the S&P 500 (.SPX) falling about 7% since the day before Fed Chair Jerome Powell's hawkish remarks last week about rate hikes. His views were later echoed by other policymakers.

All the three main indexes suffered their third straight weekly loss, as the Dow fell 2.99%, the S&P 500 declined 3.29% and the Nasdaq dropped 4.21%.

Volume on U.S. exchanges was 9.95 billion shares, compared with the 10.48 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 1.34-to-1 ratio; on Nasdaq, a 1.65-to-1 ratio favored decliners.  The S&P 500 posted three new 52-week highs and 14 new lows; the Nasdaq Composite recorded 47 new highs and 184 new lows.