NEW YORK (AP) — Wall Street drifted to a higher close but still marked its first losing week in the last 10. The listless trading followed reports showing workers are getting bigger raises, but also that key parts of the economy still don’t look like they’re overheating. The S&P 500 rose 0.2% Friday. The Dow edged up 25 points, and the Nasdaq rose 0.1%. Treasury yields initially jumped after a report showed the job market strengthened more than expected. That raised worries the Federal Reserve could keep interest rates high. Another report said growth for services businesses slowed, and traders rebuilt bets for the first cut to rates to come in March.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — Wall Street is closing its first losing week since Halloween with a listless performance Friday following reports showing workers are getting bigger raises but key parts of the economy still don’t look like they’re overheating.
The S&P 500 was 0.1% lower in late trading after flipping between small gains and losses through the day. It's on track for its first losing week in the last 10 after roaring into 2024 on hopes that inflation and the overall economy are cooling enough for the Federal Reserve to cut interest rates sharply through 2024.
The Dow Jones Industrial Average was down 52 points, or 0.1%, with an hour remaining in trading, and edging a bit further from its record set early this week. The Nasdaq composite was 0.1% lower.
Treasury yields swung sharply in the bond market following the economic reports. They initially climbed after the latest monthly jobs report showed U.S. employers unexpectedly accelerated their hiring last month. Average hourly pay for workers also rose, when economists had been forecasting a dip.
Such strong numbers are good news for workers, and they should keep the economy humming. That’s a positive for corporate profits, which are one of the main things that set prices for stocks.
But Wall Street’s worry is the strong data could also convince the Federal Reserve that upward pressure remains on inflation. That in turn could mean the Fed will hold interest rates high for longer than expected. Interest rates affect the other big factor setting stock prices, with high ones hurting financial markets.
The jobs report briefly forced traders to push out their forecasts for when the Fed could begin to cut rates. But a report later in the morning showed that growth for finance, real estate and other companies in the U.S. services industries slowed by more than economists expected last month. Perhaps just as importantly for markets, prices those businesses paid rose at a slower rate.
Following that report, traders quickly built bets back up for the Fed to begin cutting rates in March. They’re now forecasting a 68% chance of that, up slightly from a day earlier, according to data from CME Group.
Altogether, the data could bolster Wall Street's building hopes for a perfect landing for the economy, one where it slows just enough through high interest rates to stamp out high inflation but not so much that it causes a recession.
After climbing as high as 4.09% immediately after the jobs report, the yield on the 10-year Treasury fell to back to 3.96%. It eventually pulled back to 4.05%, compared with 4.00% late Thursday.
On Wall Street, Constellation Brands climbed 2% after the seller of Corona and Modelo beers in the United States reported stronger profit for the latest quarter than analysts expected.
Travel-related companies were also strong and clawing back more of their losses from earlier in the week. Carnival rose 3.2%, and American Airlines gained 3.8%.
On the losing end was Apple, whose 0.9% dip Friday has it on track for its worst week since August. It's a sharp turnaround from last year, when the market's most influential stock soared more than 48%.
This week’s broad pullback for stocks is not a surprise for many on Wall Street, who had been calling its big run since autumn overdone. Critics say the six rate cuts traders are betting on for 2024 is unlikely unless a recession occurs. The Fed itself indicated maybe three is more likely in its summary of economic projections, or SEP, released last month.
“Many who assume that the Fed will need to move faster and more aggressively than its SEP projections or recent statements likely received a dose of reality this week” from the data reports, said Rick Rieder, chief investment officer of global fixed income at BlackRock. “Things are cooling, but in a more moderate way than historically, similarly to the weather these days. There are spurts of faster cooling in some areas, but generally nothing that people should panic about, or aggressively seek shelter from.”
In stock markets abroad, indexes were mostly lower in Europe after data showed showed inflation rose to 2.9% in December. The rebound after seven straight monthly declines fueled debate over how soon the European Central Bank could cut its own interest rates.
Indexes were also lower across much of Asia. Japan's Nikkei 225 was an exception and rose 0.3%. Japanese exporters are betting a boost from the falling value of the yen against other currencies.
The yen has weakened in recent days amid speculation the Bank of Japan might go slowly on changing its ultra-aggressive policy on interest rates following Monday’s major earthquake in central Japan.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
Stan Choe, The Associated Press
