U.S. Stocks Slide as Job Gains Send Bond Yields Even Higher

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(AP Photo/Seth Wenig)

U.S. stocks are lower Friday as investors continue to worry about rising bond yields and interest rates. The Labor Department said the economy continues to add jobs at a strong pace, which makes it more likely that rates will keep rising.

The yield on the 10-year Treasury note has soared over the last three days and hasn’t been this high since mid-2011. Bond prices are falling as investors sell them, but Wall Street is also concerned that spiking interest rates could eventually slow the economy.

KEEPING SCORE: The S&P 500 index lost 18 points, or 0.6 percent, to 2,883 as of 11:45 a.m. Eastern time. The Dow Jones Industrial Average slid 203 points, or 0.8 percent, to 26,423.

Technology companies and smaller, more U.S.-focused companies continued to suffer steep losses. The Nasdaq composite skidded 101 points, or 1.3 percent, to 7,778 as technology and internet companies continued to struggle. The Russell 2000 index lost 17 points, or 1.1 percent, to 1,629.

The Nasdaq has dropped 3.4 percent this week and the Russell has tumbled 4 percent. Both indexes are on track for their biggest drops since late March, and the Russell is on pace for its lowest close since late May.

IT’S A LIVING: The Department of Labor said employers added significantly more jobs in July and August that it previously thought, which made up for a slightly disappointing gain in September. The September total was probably reduced by the damage Hurricane Florence did to the Carolinas.

Employers have added 190,000 jobs on average over the last three months, and the unemployment rate fell to its lowest level since December 1969.

Friday’s data suggest the economy should keep growing at a strong clip, which means corporate profits should continue to grow. That’s a good sign for stocks. At the same time, there are few signs of a big increase in the pace of growth or inflation. Either of those would push the Federal Reserve to raise interest rates at a faster pace, which would start to slow down the economy.

BONDS: Bond prices kept falling. The yield on the 10-year Treasury note rose to 3.22 percent from 3.19 percent. The yield on the 10-year Treasury is an important benchmark for longer-term interest rates, and it hasn’t been this high since July 2011.

The decline in bond prices and increase in yields have led to big gains for banks in the last few days because higher interest rates mean they make bigger profits on mortgages and other loans. Bond yields in Europe also rose.

SWITCHEROO: The sell-off in technology and internet companies and retailers continued. Intel lost 1.9 percent to $47.63 and Apple slipped 1.4 percent to $224.74, while Google’s parent company, Alphabet, sank 1 percent to $1,164.73. Among retailers, Netflix slumped 4.4 percent to $347.58.

Those sectors have been the biggest gainers on the S&P this year, but have taken sharp losses this week. Banks and industrial and energy companies, which have struggled in 2018, have changed place and performed better than the broader market.

Banks were mixed Friday after big gains the previous two days. Online brokerage E-Trade rose 0.9 percent to $52.95 while Goldman Sachs lost 0.9 percent to $225.45.

Several major banks will report their third-quarter results late next week as the next round of company earnings gets underway.

UNFOLLOWED: Tesla stock fell 5.5 percent to $266.26 after CEO Elon Musk taunted the Securities and Exchange Commission just a few days after he agreed to settle an SEC lawsuit triggered by a tweet he sent in August.

As part of that settlement, Musk agreed to step down as chairman and submit to oversight when he’s communicating company news. His criticisms of the SEC don’t appear to be company news, but they may have worried investors who had hoped his feed would be a little more boring from now on.

Musk and Tesla are also paying $20 million each to end the lawsuit.

COSTLY: Wholesale club operator Costco gave up 3.7 percent to $223.08 after it said it discovered technology problems related to its financial-reporting processes. Costco said it is investigating, but hasn’t found any problems with its past earnings reports so far.

OVERSEAS: European stocks fell for the second day in a row. Germany’s DAX lost 1.1 percent and the CAC 40 in France dropped 0.9 percent. Britain’s FTSE 100 fell 1.2 percent. Bond prices in all three countries fell again sending yields higher.

Japan’s benchmark Nikkei 225 fell 0.8 percent and the Kospi in South Korea dropped 0.3 percent. Hong Kong’s Hang Seng fell 0.2 percent.

ENERGY: Benchmark U.S. crude rose 0.6 percent to $74.75 a barrel in New York and Brent crude, the standard for international oil futures, picked up 0.3 percent to $84.81 a barrel in London.

CURRENCIES: The dollar slipped to 113.69 yen from 113.86 yen. The euro dipped to $1.1514 from $1.1515.

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