By Yasin Ebrahim
Investing.com – The S&P 500 struggled for direction Friday, paced by a semiconductor-led slide in tech amid surging Treasury yields as a mixed monthly job report failed to cool expectations for a sooner-rather-than-later Federal Reserve rate hike.
The S&P 500 fell 0.14%, the Dow Jones Industrial Average gained 0.27%, or 103 points, the Nasdaq lost 0.7%.
The U.S. economy created 199,000 jobs in December, markedly missing expectations for a gain of 400,000. The unemployment rate fell to 3.9% from 4.2% as the participation rate remained unchanged, pointing to a tight labor market.
In a sign that inflation pressures are likely to persist and prompt the Fed into sooner than expected monetary policy tightening, wage growth jumped 0.6% for the month, above economists' forecast for a 0.4% increase.
“Today’s data affirms the Federal Reserve’s conclusion that the labor market has recovered despite the shortfall in jobs since February 2020,” said Diane Swonk, chief economist at Grant Thornton.
Expectations for more an aggressive path of Fed tightening pushed yields higher, with the 10-year yield briefly rising to 1.8% and underpinned a bid in the cyclical sectors of the market such as financials.
The move in higher in yields is expected to continue to support the financials including bank stocks, which benefit from a rising rate environment.
“I would be looking at 2% or even 2.25% on the 10-year yield as an upside target,” Chief Market Strategist David Keller at StockCharts told Investing.com in an interview on Friday.
“[V]ery few of us have been in an environment, as investors, where banks have consistently outperformed tech stocks, that just hasn't happened in a long, long time [but] that's more the environment we're going to be in,” Keller added.
Energy stocks continued to shine even as oil prices had a timid end to the week as investors continued to back the sector ahead of the quarterly earnings season, which starts in earnest next week.
“We could come out of this first earnings season, seeing sectors like financials and energy looking fairly attractive and a lot of clouds on the horizon for growth sectors,” according to Keller.
Tech fell 0.5% as mixed performance in big tech and weakness in semiconductor stocks weighed on the sector.
Texas Instruments (NASDAQ:TXN), Lam Research (NASDAQ:LRCX) and ON Semiconductor (NASDAQ:ON) were down more 3%
Discovery (NASDAQ:DISCA) was one of the bright spots on the day, rising more than 16% after Bank of America upgraded the stock to buy from neutral, citing the company’s pending merger with Warner Media.
In other news, GameStop (NYSE:GME) gained more than 4% on reports the video game company is launching a business to create a marketplace for nonfungible tokens, or NFTs, and enter cryptocurrency partnerships.