By Yasin Ebrahim
Investing.com – The S&P 500 kicked off the second quarter with a win Friday, shrugging off a fresh warning from the bond market of a looming recession as softer job gains in March aren't expected to knock the Federal Reserve off its path to aggressively tightening monetary policy.
The S&P 500 rose 0.34%, the Dow Jones Industrial Average fell 0.40%, or 139 points, the Nasdaq added 0.29%, and the US Small Cap 2000 jumped 1%.
Nonfarm payrolls increased 431,000 in February, below consensus expectations for 490,000 new jobs, while the unemployment rate fell by more than expected to 3.6%.
The job gains for February were revised higher to 750,000 from 678,000, erasing concerns about the weakness seen in the prior month, and pointing to a labor market that is “showing strong momentum heading into Q2,” Jefferies said in a note.
Wage growth, which is expected to pick-up pace amid a tight labor market, was in-line with forecasts at 0.4%.
“With a solid jobs report and the Fed’s preferred inflation metric pushing to 6.4% as of March, there is little reason why the market should not expect a 50bps hike at the next May FOMC meeting,” Stifel said in a note.
As the bets of aggressive Fed action continue to be priced into markets, fears are growing that the Fed may slow growth by too much and tip the economy into recession.
The yield curve inverted again to deliver yet another warning sign that a recession could be on the horizon. The yield on the 2-year Treasury bond (2.428%) jumped above the yield on the 10-year Treasury note (2.360%).
Bank stocks struggled to cut losses as an inverting yield curve depresses their margins on lending, and limits growth.
SVB Financial (NASDAQ:SIVB), Fifth Third Bancorp (NASDAQ:FITB), Regions Financial (NYSE:RF) were the biggest decliners in the sector.
Tech was once again in the crosshairs as semiconductor stocks struggle to catch a break on Wall Street. Qualcomm (NASDAQ:QCOM) fell more than 3% after JPMorgan ditched the chipmaker from its Analyst Focus list.
In other news, GameStop (NYSE:GME) erased gains to trade 1% lower after the video game retailer said it would seek shareholder backing at its next shareholder meeting to split its stock.
Stocks suffered their worst quarter in two years in first quarter, as a downbeat January and February offset gains in March. But the recent melt-up in stocks will likely continue. “[T]his current equity weakness is a brief pause before extending the rally that began around March 16th,” Janney Montgomery Scott said.