U.S. stocks ended their third consecutive weekly decline after a strong August jobs report failed to ease fears that the Federal Reserve will continue hiking interest rates to combat inflation.
“We’re concerned about what the future may hold," said Kelly Cox, a U.S. investment analyst at eToro. "It’s true that inflation and the labor market are coming to balance, but at what costs? The markets are still debating.”
"To make matters worse, the S&P 500 is in a high-risk area - below three large moving averages," she added. "Those moving averages served as lows previously. Now they are acting as ceilings that the index simply can't overcome. The mood has definitely changed. While there is no possibility to test minimums, we are unlikely to reach new highs anytime soon."
This week, stocks have been hit by hawkish comments from Federal Reserve officials suggesting that interest rate hikes won't stop anytime soon. That led traders to expect a retest of the June lows, especially given the fact that September hasn’t historically been a good month for the market. Some speculate that if the S&P 500 fails to make the 3900 level, these summer lows might come back into play.
Some investors were briefly comforted on Friday by the long-awaited jobs report. It showed that the economy added 315,000 jobs per month, just below the Dow Jones’ estimates of 318,000.
The unemployment rate reached 3.7%, two-tenths of a percentage point higher than expected. The August report is crucial as the Fed will consider it before raising rates in September. Report’s data may help the central bank determine whether a 75 basis-point hike is expected.
The latest major economic report is the August Consumer Price Index (CPI) published on September 13, which is likely to define the Fed’s prospective actions.