US open: Stocks slip as strong payrolls ramp up pressure on the Fed
Upbeat news about the labour market weighed on stocks on Friday morning on Wall Street, as a forecast-smashing jobs report on headline figures brought forward expectations for the first rate rise by the Federal Reserve.
The Dow Jones Industrial Average was down 0.4% just before 10:00 in New York, the S&P 500 fell 0.3%, while the Nasdaq slipped 0.1%.
Some 295,000 non-farm payrolls were added in February, according to the Labor Department, smashing the consensus estimates of 235,000 despite the recent severe winter weather that has hit the Northeast. This was also ahead of January’s reading of 239,000, though this was revised down from the preliminary 257,000 estimate.
The unemployment rate nudged lower to 5.5% versus estimates of 5.6% and below 5.7% in January, as a result of the participation rate dropping again from 62.9% to 62.8%. The jobless rate has not been this low in nearly seven years.
Digging deeper into the numbers, the change in average hourly earnings came in at 0.1%, missing expectations of 0.2%, and sliding from 0.5%. Some believe that may be enough for the Fed to hold back from raising rates until average earnings pick up in a decent manner to truly reflect the improvement in the labour market.
However, economist Paul Dales from Capital Economics, said that "even if wage growth is still subdued, the Fed can't hang around before raising rates". He said if the Fed waits until wage growth accelerates, "they will be well behind the curve".
Furthermore, reports on Friday suggested that the snow storm that has prompted record-low temperatures across the States has moved out to sea. Even with bad weather, the US labour market managed to grow strongly in February, which bodes well for March's figure
In FX markets, the US dollar surged against the euro and the British pound after the jobs report. The greenback spiked to 1.2% to change hands with the euro at 1.08 per dollar, its weakest level since 2004. Against the pound, the dollar rose to 0.8% to trade at $1.51.
Staples slips, Foot Locker gains
Retailer Staples reported lower-than-expected fourth-quarter sales, hurt by a strong dollar and weak demand for electronics, however the company did post better-than-expected profit.
Sector peer Foot Lock impressed as quarterly earnings surged 20.6% to $146m, helped by a strong sales performance over Christmas.
AT&T was lower on the day it was revealed that Apple would kick the telecoms giant out of the Dow later this month.