Wall Street Mixed as Investors Digest Super Strong US Jobs Figures; Tesla Slides 6.6%

Key Points

• Wall Street was mixed on Friday as investors digested the implications of the latest stronger-than-expected US jobs figures.
• The S&P 500 and Nasdaq 100 both fell while the Dow gained slightly.
• A 6.6% drop in Tesla’s share price dragged the Consumer Discretionary sector lower.

Stocks Mixed as Investors Digest Strong US Jobs Numbers

Wall Street was mixed on Friday, with the S&P 500 and Nasdaq 100 indices both closing in the red while the Dow Jones Industrial Average closed slightly in the green. All of the three major indices managed to post an impressive recovery from earlier intra-day lows, as investors digested the implications of the latest much stronger than expected US jobs figures.

The US economy added 528,000 jobs in July, far more than the 250,000 expected by economists, while the pace of Average Hourly Earnings growth accelerated to 0.5% MoM and 5.2% YoY from 0.4% and 5.1% in June. Analysts interpreted the data as strongly supporting the case for further aggressive rate hikes from the US Federal Reserve.

Money markets quickly adjusting to imply a more than 60% chance of a 75 bps rate hike at the central bank’s next meeting in September from around 40% prior to the data. This hawkish adjustment to Fed tightening expectations initially weighed on stock market sentiment.

But by the second half of the session, the mood had seemingly shifted towards a focus on the positive signals that this week’s data have sent about the US economy. Recall that ISM Services PMI data on Thursday pointed to a surprise surge in business activity in July. Data this week has dealt a significant blow to the idea that the US economy might be on the verge of/already in recession. The S&P 500 ended the week up 0.4%, the Nasdaq 100 up 2.0% and the Dow roughly flat.

Sharp Drop in TSLA Shares Weighs on Consumer Discretionary

In terms of the S&P 500 GICS sectors, the picture was mixed. Consumer Discretionary was the worst performer, dropping 1.7% amid a 6.6% decline in Tesla’s share price. Analysts said that Tesla investors were spooked by commentary from CEO Elon Musk during Thursday’s annual meeting. Musk said he wants Tesla to sell 20 million vehicles a year by 2030 and analysts said his ambitious growth plans highlighted the need for Tesla to raise more capital from investors, perhaps diluting the current stock pool.

The sharp rise in US bond yields on the strong jobs data helped Financials gain 0.8%, while Energy was the best performing sector with a 2.0% gain as oil prices enjoyed some much-needed stabilization after slumping to their lowest since prior to Russia’s February invasion of Ukraine under $90 per barrel on Thursday.