4.02pm: Markets close in losses
US stocks ended the week with losses as the better-than-expected jobs report got overshadowed by escalating brutality against Ukraine by Russia.
The Dow Jones Industrial Average closed with losses of 0.6% or 180 points at 33,615, while the S&P 500 lost 0.8% at 4,329, and the Nasdaq Composite shed 1.6% at 13,313.
12.00pm: Dow plunges 400 points
US equities edged lower midday Friday as the Russia-Ukraine war overshadowed the better-than-expected payrolls data.
At noon, the Dow Jones Industrial Average slipped 1.3% or 421 points at 33,373, while the Nasdaq Composite plunged a significant 1.8%, and the S&P 500 lost 1.4%.
“Despite the strength of today’s payrolls report US markets have joined their European cousins in moving lower,” commented Chris Beauchamp, chief market analyst at online trading platform IG. “As a see-saw week draws to a close, the sellers once again have the upper hand.”
He added that it is clear that ‘Ukraine worries’ will be the catch-all term for market declines, but with the war now over a week old the same bearish view that developed last week still applies – markets are ill-prepared for a conflict with all its unknowable consequences, “especially when combined with surging oil prices and rising inflation, mixed in with central banks who are not displaying any of the dovishness needed to rescue sentiment.”
Meanwhile, energy prices went soaring, alongside oil prices. Diamondback Energy climbed 1.3%, and Occidental Petroleum jumped 7.2%.
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10.05am: Markets falter amid geopolitical clashes
US stocks opened lower Friday despite stronger-than-expected payrolls data as investors eyed intensifying conflict between Russia and Ukraine.
At the open, the Dow Jones Industrial Average significantly plunged by more than 400 points, or 1.3% at 33,359, while the tech-laden Nasdaq Composite and the S&P 500 were both down by 1.3% each.
The market move comes after Russia attacked the Zaporizhzhia plant in southeast Ukraine. “Such reckless attacks on a nuclear plant compounds fears about just how far Putin is prepared to go in Ukraine,” noted Craig Erlam, senior market analyst, UK & EMEA, OANDA. “There is a real fear that the worst is yet to come which is obviously deeply worrying.”
“Sanctions were never going to come without an element of self-harm and we’re seeing evidence of that this week,” said Erlam. “With Putin clearly undeterred, further measures will be demanded which will come at a further cost.”
On the economic front, the US created 678,000 jobs last month which far exceeded expectations, not to mention Wednesday’s ADP number which has never been reliable, noted Erlam.
The big question is what this means for monetary policy.
“All things being equal, stronger than expected employment growth, coupled with other positive economic data over the last month and seemingly ever-increasing inflation, would virtually guarantee a sharp tightening, especially given Jerome Powell’s comments earlier this week – so the Fed will be under scrutiny to move quickly and decisively to hike rates at its next meeting,” commented Shafiq Shabir, head of electronic trading at Intertrader.
Erlam said that the dollar softened a little after the report but remained much higher on the day. “It’s a strong report but does little to shift interest rate expectations ahead of the meeting in a couple of weeks.”
The next three meetings will probably deliver 75 basis points of hikes.
8.50am: Payrolls data surprisingly strong
The US economy added 678,000 jobs in February, bringing down the employment rate to 3.8%, and pointing at a robust labor market as the Federal Reserve inches forward to raise interest rates.
Economists had expected to see a 440,000 increase in non-farm payrolls in February and the unemployment rate falling to 3.9% from 4.0% a month earlier.
After the data, US stock futures continued to point to a weaker open with more attention being paid to the intensifying Russia-Ukraine conflict. Contracts for the Dow Jones Industrials Average were down by 0.9%, while futures for the tech-laden Nasdaq-100 and the broader S&P 500 were both lower by 0.8% and 0.9%, respectively.
“We have a very tight labor market, and it confirms that there is plenty of room for the Fed to increase the interest rates,” said Naeem Aslam, chief market analyst of Avatrade. “The initial reaction in the forex market for the dollar index has been positive because the data has brought good news for them.”
He noted that as for the equity markets, “we also see a relief there, but the main focus among traders is the ongoing geological tensions in Ukraine, and they are likely to remain there.”
Investors are concerned that the jobs report is not going to matter much in terms of correcting the surging inflationary pressures. Fed chair Jerome Powell recommended a 25 basis point hike in his testimony to the Congress last week.
6.30am: US stocks continue to be volatile
US stocks are expected to end a volatile week cautiously as the Russia/Ukraine conflict intensifies, while the latest monthly US jobs report is expected to add to pressures on the Federal Reserve to hike interest rates this month as inflation spirals higher.
News of damage to a major Ukrainian nuclear-power plant has rattled already fragile market sentiment, with investors trying to assess how much the conflict, and tough Western sanctions on Russia, will damage global economic growth and further stoke inflation by disrupting commodity supplies.
Futures for the blue-chip Dow Jones Industrial Average, the broader S&P 500 and tech-laden Nasdaq-100 fell between 0.7% and 0.8%.
Friday’s jobs report, due at 8.30am ET, is expected to show a 440,000 increase in non-farm payrolls in February and the unemployment rate falling to 3.9% from 4.0% a month earlier, according to a Wall Street Journal survey of economists.
Such a job gain would be historically strong, being more than double the average monthly increase of 164,000 jobs in 2019, the year before the coronavirus (COVID-19) pandemic hit But it would also mark a slowdown from January’s gain of 467,000 jobs, December’s increase of 510,000 jobs and November’s growth of 647,000.
The numbers, however, won’t show what effect, if any, Russia’s invasion of Ukraine last week and the subsequent run-up in oil prices have had on the labor market.
As Neil Wilson, chief market analyst for Markets.com said in a note to clients: “US jobs report today … but will anyone care when all eyes are on Nato and Ukraine? Eyes will be on wage data – are we in a wage price spiral? (almost certainly we are already).”
On commodity markets, Brent crude oil rose back above $110 a barrel having fallen back from peaks above $115 hit on Thursday.