US Shares slide after robust jobs data, renewed rate concerns

The S&P 500 fell 1.6%, while the Dow Jones Industrial Average shed 350 points, or 1%. The Nasdaq Composite tumbled 2.5%. Meanwhile, the most notable move following the jobs report came from the bond market, with the yield on 10-year Treasury jumping as much as 7 basis points to near 3% following the release before slightly retreating.

US shares slid on Friday to close the trading week lower as investors digest hot May jobs data that likely gave a signal to Fed policymakers on labour market conditions which could pave the way for more hawkish rate hikes.

Although job growth slowed from April, the labour market remained tight, suggesting the Federal Reserve may proceed with tightening monetary conditions further by raising interest rates — a point of worry for investors who fear central bank policies may tip the economy into a recession.

The Labour Department’s latest monthly employment report showed 390,000 jobs were added to the US economy in May, with the unemployment rate holding steady at 3.6%. Economists had expected a clip of 318,000 jobs with the unemployment rate falling to 3.5%, per Bloomberg consensus data.

It looks like the job creation machine runs on full-steam and anecdotal evidence has it that hiring remains difficult for businesses of all sizes as demand outpaces supply. Looking ahead, the Fed is most likely to feel reassured that it has struck the right balance lately. And, in turn, Fed could stick to its aggressive monetary normalization path.

Fed’s Loretta Mester indicated in an interview with CNBC Friday that she supports half point hikes at the next two policy-setting meetings in June and July, and more in autumn if prices don’t cool. Investors had previously hoped for a pause after the summer months. “I’m going to come into the September meeting, if I don’t see compelling evidence [that inflation is cooling], I could easily be at 50 basis points in that meeting as well,” she said.
On Friday, shares of Tesla closed down more than 9% to $703.55 per share after Reuters reported CEO Elon Musk warned of a “super bad feeling” about the economy and said the company is expected to trim about 10% of jobs in an email to executives.

Musk also motioned management to “pause all hiring worldwide” in the note. The electric-vehicle giant joins a growing docket of companies that have recently reported grappling with headwinds from macroeconomic uncertainty.

Musk’s warning comes just days after JPMorgan Chase (JPM) boss Jamie Dimon cautioned of a “hurricane” bearing down on the US economy.