A person waits on the Wall Street subway platform in the Financial District of Manhattan, New York City, U.S., August 20, 2021. REUTERS/Andrew Kelly

  • Dismal August jobs report calms taper fears
  • Banking stocks slide, shrug off jump in bond yields
  • Didi gains on report Beijing looks to take it under state control
  • Indexes: Dow off 0.30%, S&P down 0.14%, Nasdaq up 0.07%

Sept 3 (Reuters) – The S&P 500 and the Dow fell on Friday as a slowdown in U.S. jobs growth raised questions about the pace of the economic recovery, while the tech-heavy Nasdaq rose as the report also calmed fears of an imminent tapering in monetary policy.

Nine of the 11 S&P sectors were down by early afternoon, with economically sensitive industrials (.SPLRCI) and financial (.SPSY) stocks leading declines.

Banking stocks (.SPXBK), which generally perform better when bond yields are higher, dropped 0.6% even as the benchmark 10-year Treasury yield jumped following the report.

“The number’s a big disappointment and it’s clear the Delta variant had a negative impact on the labor economy this summer,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“You can tell because leisure and hospitality didn’t add any jobs and retail actually lost jobs. Investors will conclude that perhaps this will put the (Federal Reserve) further on hold in terms of the timing of tapering. Markets may be okay with that.”

The S&P 500 and the Nasdaq had scaled all-time highs over the past few weeks on support from robust corporate earnings, but investors had recently grown cautious on hawkish signals from the Fed and a jump in infections.

The labor market remains the key touchstone for the Fed, with Chair Jerome Powell hinting last week that reaching full employment was a pre-requisite for the central bank to start paring back its asset purchases.

On Friday, the Labor Department’s closely watched report showed nonfarm payrolls increased by 235,000 jobs in August, widely missing economists’ estimate of 750,000. Payrolls had surged 1.05 million in July. read more

By 12:02 p.m. ET, the Dow Jones Industrial Average (.DJI) and the S&P 500 (.SPX) were down 0.3% and 0.1%, respectively, with economy-linked industrial stocks including General Electric (GE.N), 3M (MMM.N) and Boeing (BA.N) falling between 0.2% and 1.7%.

The Nasdaq Composite (.IXIC), on the other hand, rose 0.07%, boosted by technology heavyweights, including Apple (AAPL.O), Alphabet (GOOGL.O), and Facebook (FB.O). Tech stocks tend to perform better in a low interest-rate environment.

Chinese ride-hailing firm Didi Global (DIDI.N) gained 1.8% after a media report that the city of Beijing was considering moves that would give state entities control of the company. read more

Biotechnology firm Forte Biosciences (FBRX.O) slumped 81.4% to be among the top decliners across U.S. exchanges after its experimental treatment for eczema, a skin disease, failed to meet its main goal.

Declining issues outnumbered advancers for a 1.98-to-1 ratio on the NYSE and a 1.80-to-1 ratio on the Nasdaq.

The S&P index recorded 32 new 52-week highs and one

The blue-chip Dow Jones Industrial Average edged up to another record close Wednesday, despite concerns about rising inflation and the eventual withdrawal of flush monetary policy as the economy reopens in the wake of the pandemic, though technology stocks fell for a fourth straight day.

Market participants also parsed dovish comments from Fed staffers and economic data showing a healthy economic recovery.

How did stock benchmarks perform?
  • The Dow Jones Industrial Average
    DJIA,
    +0.29%
    rose 97.31 points to close at a record 34,230.34, a gain of 0.3%, after also setting an intraday record of 34,331.20. That marked its 22nd record of the year, matching last year’s record finishes.
  • The S&P 500 index
    SPX,
    +0.07%
    added 2.93 points, or 0.1%, finishing at 4,167.59.
  • The Nasdaq Composite Index
    COMP,
    -0.37%
    fell 51.08 points, or 0.4%, to end at 13,582.42, a 4th day of losses and its longest losing streak since the five-day stretch booked on Oct. 19.

On Tuesday, the Dow
DJIA,
+0.29%
rose 19.80 points, or 0.1%, to 34,133.03, bouncing close to 370 points from its intraday low of 33,765.68. The S&P 500
SPX,
+0.07%
fell 28 points, or 0.7%, at 4,164.66, while the Nasdaq Composite
COMP,
-0.37%
 dropped 261.61 points, or 1.9%, to 13,633.50, for its largest one day decline since Wednesday, March 24, 2021.

What drove the market?

The Dow touched a intraday and closing record Wednesday, as stocks outside of the tech sector recovered some of Tuesday’s losses, helped by better-than-expected corporate earnings reports and some supportive economic data.

But the prospects of an eventual withdrawal of pandemic-era liquidity from the Federal Reserve also weighed on the market.

“If you think about the last year, its been highly accommodative monetary policy across the board, with aggressive fiscal stimulus to fight the pandemic,” said Matt Stucky, an equities portfolio manager at Northwestern Mutual.

Those things were “right to do,” Stucky said, but added that investors have been coming to grips with the notion that crisis-levels of liquidity are unlikely to last forever.

“It’s not just today and yesterday, it’s been a factor for the last couple of weeks,” he told MarketWatch.

The overall message from Fed staffers on Wednesday was to expect the go-slow strategy to continue, and that more healing needs to happen in the economy before the central bank will consider reducing its extensive support for markets.

Cleveland Fed President Loretta Mester said the job market will need to make further improvements before the Fed’s conditions for reducing its support are met, while speak Wednesday at the Boston Economic Club.

Boston Federal Reserve President Eric Rosengren said that temporary factors will push measured inflation higher this spring, but the distortions won’t last long, echoing comments made Wednesday by  Chicago Fed President Charles Evans.

Investors also were focused on economic data, with the Institute for Supply Management reporting growth in service-oriented businesses, such as retailers, restaurants and healthcare providers slipped to 62.7% last month from 63.7% in March.

That contrasts with an increase in the IHS Markit service