The SPDR S&P 500 ETF Trust (NYSE:SPY) traded lower Friday after the Labor Department reported strong U.S. jobs market numbers from September.
The U.S. added 263,000 jobs in September, beating average economist estimates of 250,000 jobs. The unemployment rate fell 0.2% to 3.5%, below consensus estimates of 3.7%. Wages were up 5% year-over-year and increased 0.3% from August.
Economy Cooling, But Still Strong: Mark Putrino, chief market technician and lead educator at Benzinga.com, said a strong economy is bad for stock prices for now.
"The unexpected economic strength is a signal that inflation is probably still moving higher," Putrino said.
Russell Evans, chief investment officer for Avitas Wealth Management, said slowing job growth may be an early indicator that inflation levels are headed lower.
"One month of slowing job growth is likely not enough for the Fed to make any drastic changes to its policy and we would need to see several months of a weakening employment picture in order for the Fed to act," Evans said.
Bryce Doty Sr. VP/senior portfolio manager at Sit Investment, said the strong jobs report would normally be wonderful news for the Fed, but the central bank is hoping unemployment rates will rise somewhat and alleviate inflationary pressures.
"So full steam ahead on rate increases, which investors know is a mistake," Doty said.
Bad News For Markets: Cliff Hodge, chief investment officer at Cornerstone Wealth, said the report keeps the Fed's monetary policy tightening trajectory on track.
"We are going to remain in the environment where good news for the economy is bad news for markets," Hodge said.
Peter Essele, head of portfolio management at Commonwealth Financial Network, said financial market volatility will continue until Wall Street gets a clear indication inflation is under control.
"Until then, price fluctuation will be the norm and investors should look to strategies that can take advantage of periods of volatility," Essele said.
Jan Szilagyi, CEO and co-founder of Toggle, said the economy no longer appears to be overheating.
"A slightly lower growth in wage growth — combined with lower job openings two days ago — suggests [the] labor market is moderating even as it remains strong," Szilagyi said.
Recession Coming? Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said predictions of a mild recession may be underestimating the threat.
"Given the conditions that we are operating under, we believe it’s prudent to begin preparing for a recession and the talk of a shallow recession that is now the narrative-du-jour, strikes us as eerily similar to the 'inflation is transitory' narrative of last year."
Quincy Krosby, chief global strategist at LPL Financial, said slowing jobs and wage growth are signs the Fed's aggressive campaign against inflation is starting to have an impact.
"Still, the market's initial negative reaction underscores that inflationary pressures are not decreasing fast enough for the market to be convinced that the Fed is closer to the end of its tightening cycle," Krosby said.
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