Wall Street's main indexes slipped on Friday as the latest monthly jobs report signaled resilience in the U.S. economy, backing the case for an aggressive policy tightening by the Federal Reserve.
The Labor Department's closely watched employment report showed the U.S. labor market was rapidly tightening, while the rate of unemployment was dropping.
U.S. employers added 431,000 jobs in March. While the numbers fell short of economists' expectations, the jobless rate dropped to 3.6%, the lowest since February 2020 and average hourly earnings increased 0.4%.
"This was a pretty solid report. Inflation is still a problem obviously and it certainly doesn't change what the Fed's likely actions are going to be," said Randy Frederick, managing director, trading and derivatives at Schwab Center for Financial Research.
"I think we've already kind of been told not explicitly, but pretty close to that, that we're going to get a half point rate hike in May."
Traders now see a 72.8% chance of a 50-basis point interest rate hike in May. The U.S. central bank last month increased it by 25 basis points for the first time since 2018 and policymakers have signaled readiness for aggressive rate hikes to combat decades-high inflation.
U.S. Treasury yields jumped and a closely watched part of the yield curve reinverted after the data, knocking bank stocks 0.9% lower. Lenders often borrow short-term and lend long-term and make money on the different rates when the curve is sloped.
Data also showed U.S. manufacturing activity unexpectedly slowed in March as tight supply chains continued to drive input prices higher.
Six of the 11 major S&P 500 sectors advanced in mid-day trading, led by gains in real estate and energy .
At 12:26 p.m. ET, the Dow Jones Industrial Average was down 76.48 points, or 0.22%, at 34,601.87, the S&P 500 was down 12.50 points, or 0.28%, at 4,517.91, and the Nasdaq Composite was down 45.64 points, or 0.32%, at 14,174.88.
The indexes ended the first quarter on Thursday with their biggest quarterly decline in two years as concerns persisted about the continuing conflict in Ukraine and its inflationary effect.
Video game retailer GameStop Corp, which was at the center of a social-media fueled trading frenzy last year, rose 4.7%, following its plan to seek shareholder approval for a stock split.
Apple Inc fell 1.1% after J.P. Morgan removed the stock from its analyst 'focus list', while Tesla Inc inched 0.1% higher ahead of its quarterly deliveries report.
Advancing issues outnumbered decliners for a 1.17-to-1 ratio on the NYSE and a 1.12-to-1 ratio on the Nasdaq.
The S&P index recorded seven new 52-week highs and seven new lows, while the Nasdaq recorded 49 new highs and 91 new lows.
(Reporting by Amruta Khandekar, Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Arun Koyyur and Shounak Dasgupta)