U.S. stocks fell on Friday as a slightly weaker-than-expected June jobs report failed to ease fears that the Federal Reserve may start raising interest rates again.

The Dow Jones industrial average lost 48 points, or 0.1%. The Standard & Poor’s index fell 0.1%, while the Nasdaq composite index was near a flat line.

The Labor Department report for June showed a smaller-than-expected wage increase and growth slowed from May. Nonfarm payrolls increased by 209,000 jobs, while the unemployment rate was 3.6%, up from 3.7% in May. Economists polled by Dow Jones expect an increase of 240,000 jobs and about the same level of unemployment.
Parts of the report could give the Fed reason to resume tightening later this month. Average hourly earnings rose 0.4% in June and 4.4% from a year ago, while closely watched wage numbers were slightly stronger than expected.

“The weaker-than-expected jobs data in the headlines was not supported by some of the other data in the report,” Peter Sear of Academic Securities wrote in a note.

He added: “It is a mixed enough statement that the central bank may go 25 basis points at the next meeting, but there is no need to pay more than that.”

After the data, traders are keeping their bets that the central bank will resume tightening later this month. According to CME Group’s FeedWatch tool, traders expect a 92% chance the Fed will raise the benchmark on July 26. Policymakers noted at a meeting in June that “two more interest rate hikes could come in 2023.”

Friday’s moves follow Thursday’s ADP data, where the report showed that private sector employers added 497,000 jobs in June, beating the estimate of 220,000 among economists polled by Dow Jones.

The EDP results raised concerns about the central bank’s next steps. Bond yields rose during regular trading Thursday, and the two-year Treasury rate, the most sensitive to central bank policy, hit its highest level since 2007.

European stocks

European stock markets rose on Friday after a sharp decline in the previous session. The pan-European Stoxx 600 index rose 0.2% in midday trade as sectors posted a mix of marginal gains and declines. Utilities stocks were the biggest losers, down 0.8%, while chemical stocks rose 1.3%.

Britain’s FTSE 100 index fell 0.27% to 7,260.86 points. As for the German “DAX” index, it rose 0.32% to 15,577.56 points and the French “CAC 40” index rose 0.45% to 7,114.35 points.

New economic data from the United States led to a gloomy session that slipped further into the red, and the Stoxx 600 index ended the session down 2.5%. All sectors were in the negative with Travel & Leisure down 4% and Retail stocks down 3.7%.

Strong U.S. jobs data pushed two-year Treasury yields to a 16-year high, with data indicating the Federal Reserve may have more fiscal tightening in the pipeline.

(agencies)