NEW YORK (AP) – U.S. stock indexes churned in early trading Friday, with high-dividend stocks falling and tech stocks rising, after a surprisingly strong jobs report pushed investors to gird for higher interest rates.
Not only was hiring stronger than expected last month, so were wage gains for workers. That clears the way for the Federal Reserve to raise short-term interest rates at its meeting later this month for the third time this year, economists say, and Treasury yields jumped in response.
Worries about global trade also hung over markets as the United States considers whether to impose more tariffs on China, the world’s second-largest economy.
KEEPING SCORE: The S&P; 500 lost 3 points, or 0.1 percent, to 2,874, as of 10 a.m. Eastern time. It had been down as much as 0.5 percent shortly after the start of trading.
The Dow Jones industrial average fell 64, or 0.2 percent, to 25,931, and the Nasdaq rose 18, or 0.2 percent, to 7,941.
BIGGER PAYCHECKS: Hiring was strong last month, and the unemployment rate remained near an 18-year low. That helped push up the average hourly wage by 2.9 percent from a year earlier, the fastest gain in eight years.
If wage growth continues accelerating, it could feed into higher inflation throughout the economy. That in turn could push the Federal Reserve to get more aggressive about raising rates, something the central bank has pledged to do slowly and steadily.
Higher interest rates can hurt stock prices because they make bonds look more attractive as alternative investments. The market went through a similar scenario in February, when that month’s jobs report showed a surprisingly big increase in wages. But investors recently have been preparing themselves for a total of four rate increases for 2018 following comments from the Fed.
YIELDS: The yield on the 10-year Treasury jumped to 2.94 percent to from 2.87 percent late Thursday. The two-year yield rose to 2.70 percent from 2.62 percent.
DIVIDENDS DULLED: When bonds are offering higher yields, it can pull buyers away from stocks that pay big dividends. Utility stocks and real-estate investment trusts, which are among the market’s highest dividend payers, had some of the day’s steepest losses.
Utilities in the S&P; 500 fell 1.3 percent, and real-estate investment trusts lost 0.9 percent.
UP IN SMOKE: Tesla plunged after its chief accounting officer resigned just a month into the job. Dave Morton said he believes in Tesla and has no disagreements with its leadership about its financial reporting, but he was not expecting so much public attention and such a fast pace at the company when he joined on Aug. 6.
Tesla fell 7 percent to $261.02.
TECH RECOVERY: Tech stocks have stumbled this week, a relatively rare occurrence for a group of companies that have led the market for much of the last five years. But technology stocks were again the market’s leaders on Friday, and those in the S&P; 500 rose 0.3 percent for the biggest gain among the 11 sectors that make up the index.
Broadcom was one of the strongest stocks in the index after reporting stronger-than-expected profit for the latest quarter. The chipmaker’s stock jumped 6.3 percent to $229.54.
US-CHINA TENSIONS: The Trump administration may impose tariffs of up to 25 percent on an additional $200 billion in Chinese goods, after a public comment period ended Thursday. The imports are equal to nearly 40 percent of all the goods China sold the U.S. last year. Doing so would escalate a confrontation between the world’s two biggest economies and likely squeeze U.S. companies that import everything from handbags to bicycle tires. China has said that it is ready to retaliate with “necessary countermeasures” if President Donald Trump goes ahead with the tariff hike. China’s Commerce Ministry spokesman Gao Feng said Thursday that the country is confident it can maintain “steady and healthy” economic growth. It has announced a $60 billion list of American products targeted for retaliation. The Chinese government has said it would help local and even foreign businesses in the country mitigate the effects of the trade dispute.
MARKETS OVERSEAS: In Asia, Japan’s Nikkei 225 index lost 0.8 percent, and the Kospi in South Korea dropped 0.3 percent. Hong Kong’s Hang Seng index, which has dropped 18 percent since its peak in late January, was virtually unchanged.
In Europe, France’s CAC 40 rose 0.1 percent, and Germany’s DAX slipped 0.1 percent. The FTSE 100 in London fell 0.7 percent.
CURRENCIES: The dollar rose to 111.14 Japanese yen from 110.83 yen late Thursday. The euro fell to $1.1582 from $1.1625, and the British pound rose to $1.2966 from $1.2933.
COMMODITIES: Benchmark U.S. crude fell 57 cents to $67.20 per barrel. Brent crude, the international standard, slipped 40 cents to $76.10.
Gold slipped 30 cents to $1,204.00 per ounce.
AP Writer Annabelle Liang contributed from Singapore.
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