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Stocks Edge Lower After Rally

(Bloomberg) — Stocks edged lower after a rally that drove the market to multiple records this year, with traders weighing mixed jobs data.

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The S&P 500 erased gains amid weakness in its most-influential group: technology. Warnings about a pullback have surfaced after the benchmark gaugeÔÇÖs 35% surge since the start of last year. The tech-heavy Nasdaq 100 fell about 1%. Bonds saw small moves, with shorter maturities outperforming longer ones.

A report Friday showed the economy continued to add jobs ÔÇö without spurring a surge in wages, which could derail the disinflationary process. The figures revived hopes the Federal Reserve will be able to achieve a soft landing, allowing officials to start easing policy this year, but without running the risk of doing that too soon.

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ÔÇ£The report didnÔÇÖt necessarily amount to an ÔÇÿall-clearÔÇÖ signal for the Fed, but there also didnÔÇÖt appear to be anything in it that would derail its plan to cut rates,ÔÇØ said Chris Larkin at E*Trade from Morgan Stanley.

The S&P 500 hovered near 5,150. Nvidia Corp. halted a six-day rally, Tesla Inc. extended this weekÔÇÖs slide to 13% and Broadcom Inc. sank on soft chip sales. Taiwan Semiconductor Manufacturing Co. is set to win more than $5 billion in federal grants to support a chipmaking project in Arizona, according to people familiar with the matter.

Treasury two-year yields fell two basis points to 4.48%, with traders almost fully pricing in a quarter-point Fed cut in June. The dollar was set for its longest losing streak since October. Gold hit a fresh peak. Bitcoin briefly touched $70,000.

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The US jobless rate climbed to a two-year high in February even as hiring remained healthy, pointing to a cooler yet resilient labor market.

Nonfarm payrolls advanced 275,000 last month following a combined 167,000 downward revision to the prior two months. The unemployment rate rose to 3.9% and wage gains slowed.

ÔÇ£This job report is probably the best thing markets could be expecting for now,ÔÇØ said Florian Ielpo at Lombard Odier Asset Management. This number is consistent with the idea of an economy thatÔÇÖs ÔÇ£not too hot, not too cold, somewhat a sweet spot for markets.ÔÇØ

The report was seen as ÔÇ£all over the placeÔÇØ by Seema Shah at Principal Asset Management and several other market observers. Nonetheless, Shah sees the broad figures as somewhat market positive.

ÔÇ£If the economy can continue to add jobs, without triggering a resurgence in wage growth, the Fed will achieve its soft landing,ÔÇØ she noted.

In other words, this report confirms that the labor market is strong ÔÇö but not overheating ÔÇö which means the Fed is still on track for rate cuts this year, says Sonu Varghese at Carson Group.

ÔÇ£Labor is rolling, and wage inflation is rolling over ÔÇö the Fed is threading the needle on its dual mandate,ÔÇØ said Jamie Cox at Harris Financial Group. ÔÇ£No one expected this result, but itÔÇÖs happening.ÔÇØ

Investors are taking the US job report as ÔÇ£good newsÔÇØ even though the mixed payroll figures provide few solid signals for policymakers, according to Mohamed El-Erian, the president of QueensÔÇÖ College, Cambridge.

ÔÇ£The bottom line for policymakers and most economists, we will see this as not containing much new information,ÔÇØ El-Erian told Bloomberg Television. But investorsÔÇÖ current mindset is that ÔÇ£good news is good news; bad news is good news,ÔÇØ he said.

Swap contracts that predict the FedÔÇÖs decisions repriced to lower rate levels, implying traders expect close to 100 basis points of Fed easing by year-end. Last month, these contracts briefly priced in less than 75 basis points of easing this year, down from more than 150 basis points seen early in 2024.

To Gina Bolvin at Bolvin Wealth Management Group, the fact that unemployment ticked up was the biggest takeaway of FridayÔÇÖs numbers. SheÔÇÖs among those betting the odds of a rate cut in June are increasing as the Fed would become worried if unemployment reached 4%.

ÔÇ£If we are genuinely seeing the unemployment rate having troughed and moving higher and wage growth slowing, then it obviously pushes the door for rate cuts open wider,ÔÇØ said Charles Hepworth at GAM Investments.

Fed Chair Jerome Powell, testifying this week before lawmakers, said he believed the labor market was ÔÇ£coming into better balance between supply and demand.ÔÇØ He also suggested the central bank is getting close to the confidence it needs to start lowering interest rates.

Ian Lyngen at BMO Capital Markets says soft wage figures were notable.

ÔÇ£If nothing else, this update on wage inflation reflects PowellÔÇÖs messaging that the first cut is nearing,ÔÇØ he noted.

Corporate Highlights:

• Nvidia Corp.ÔÇÖs scorching rally has added more than $1 trillion in value this year alone, sending it well above the level where it last split its shares.

• A United Airlines Holdings Inc. aircraft ran off the taxiway into a grassy area after landing at Houston Friday, the third incident this week involving the airlineÔÇÖs Boeing Co. planes.

• Eli Lilly & Co.ÔÇÖs AlzheimerÔÇÖs disease drug donanemab faces further delays in gaining US approval, with regulators planning to hold a hearing of external advisers to explore how safe the therapy is and how well it works.

• Gap Inc. reported fourth-quarter earnings that exceeded expectations, a sign that efforts to turn the storied apparel retailer around are bearing fruit.

• Huawei Technologies Co. and its partner Semiconductor Manufacturing International Corp. relied on US technology to produce an advanced chip in China last year, according to people with knowledge of the matter.

• Novo Nordisk A/S expects the price of its blockbuster weight loss drug Wegovy to drop as more patients get access to the treatment via insurers and health-care systems, paving the way for broader use, Chief Executive Officer Lars Fruergaard Jorgensen said.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2% as of 12:19 p.m. New York time

• The Nasdaq 100 fell 0.9%

• The Dow Jones Industrial Average rose 0.2%

• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro was little changed at $1.0941

• The British pound rose 0.3% to $1.2850

• The Japanese yen rose 0.6% to 147.13 per dollar

Cryptocurrencies

• Bitcoin rose 0.9% to $67,960.38

• Ether rose 1% to $3,914.86

Bonds

• The yield on 10-year Treasuries was little changed at 4.09%

• GermanyÔÇÖs 10-year yield declined four basis points to 2.27%

• BritainÔÇÖs 10-year yield declined two basis points to 3.98%

Commodities

• West Texas Intermediate crude fell 0.9% to $78.19 a barrel

• Spot gold rose 1.6% to $2,194.71 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Felice Maranz, Liz Capo McCormick and Elizabeth Stanton.

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