Stock Market Today: Stocks Swing Lower as Early Jobs-Fueled Rally Fizzles

The major indexes all rose more than 1% after data showed job growth slowed in August, but erased those gains by the close.

blue ticker board with red outline of arrow pointing down
(Image credit: Getty Images)

Stocks jumped out of the gate Friday after the release of the August jobs report. But enthusiasm from the few investors that stuck around ahead of the long holiday weekend didn't last, with all three indexes ending in the red.

The Labor Department this morning said the U.S. added 315,000 new jobs in August, well below July's 526,000. Also in the jobs report: the unemployment rate edged up to 3.7% from 3.5%; the labor participation rate, or the number of people actively seeking work, improved to 62.4% from 62.1%; and average hourly earnings – a key measure of labor cost inflation – was up 5.2% year-over-year, same as it was in July.

"Friday's jobs data provided some moderate relief, with payrolls almost landing precisely on consensus at +315,000 in August," says Douglas Porter, chief economist at BMO Capital Markets." While no doubt a solid advance – and completely inconsistent with recession chatter – other aspects of the report sent some calming signals." Porter points to steady wage growth, an increasing labor force and the rising unemployment rate that suggest "the extreme tightness in the job market may be beginning to moderate – almost exactly what the Fed doctor ordered."

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Still, the major indexes, after being up more than 1% each around lunchtime, swung lower in afternoon trading after news reports indicated Russian energy giant Gazprom will indefinitely suspend operations of a natural-gas pipeline to Germany.

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By the close, the Nasdaq Composite was down 1.3% at 11,630, bringing its daily losing streak to six. The S&P 500 Index (-1.1% at 3,924) and the Dow Jones Industrial Average (-1.1% at 31,318) also finished in negative territory. All three indexes were lower for a third consecutive week.

As a reminder, the stock market is closed this Monday, Sept. 5, in observance of Labor Day.

daily price chart for Dow, S&P 500 and Nasdaq on Friday, September 2

(Image credit: YCharts)

Other news in the stock market today:

  • The small-cap Russell 2000 droppped 0.7% to 1,809.
  • U.S. crude futures edged up 0.3% to $86.87 per barrel today, but still finished 6.7% lower on the week.
  • Gold futures rose 0.8% Friday to settle at $1,722.60 an ounce, but gave back 1.6% on a weekly basis.
  • Bitcoin ticked 0.1% higher to $19,900.05. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
  • Starbucks (SBUX (opens in new tab)) fell 2.9% after the coffee-shop chain said it has appointed Laxman Narasimhan as its new CEO. Narasimhan is the former CEO of U.K. consumer brands company Reckitt Benckiser Group (RBGLY (opens in new tab)). He is slated to start at Starbucks on Oct. 1, before completely taking over the reins from interim CEO Howard Schultz next spring. "Defying expectations for someone on the board or formerly in Starbucks management to take the helm, Starbucks instead tapped an outsider to lead the company," says William Blair analyst Sharon Zackfia. The analyst has an Outperform rating on SBUX, which is the equivalent of a Buy, "given ongoing healthy domestic demand, the global strength of the brand (and concurrent pricing power), and healthy balance sheet."
  • Lululemon Athletica (LULU (opens in new tab)) jumped 6.7% after the athletic apparel maker reported earnings. In its second quarter, LULU brought in earnings of $2.20 per share on revenue of $1.9 billion, easily beating analysts' consensus estimates. The company also said same-store sales were up 28% in the three-month period. "Lululemon has a strong brand and growing direct-to-consumer sales, which we expect will lead to higher margins over the next several years," says Argus Research analyst John Staszak. "Despite headwinds, we expect the company’s momentum to continue." Staszak says that even though inventory was up 85% in Q2, the company "sells a higher percentage of its products at full price than its competitors and should not have to cut its prices in order to move its inventory." He adds that LULU's prospects "are among the best in the apparel sector."

Why Investors Should Consider Dividend Stocks

Today's jobs data is certainly an important factor in the Fed's rate-hike plans, but it's arguably not the most important one. The August consumer price index (CPI), which is set for release on Sept. 13, "will remain key for how the Fed weighs its decision regarding the magnitude of the September hike," says Luke Tilley and Rhea Thomas, chief economist and senior economist, respectively, at Wilmington Trust. "The outlook for inflation remains the primary concern for investors. Persistent inflation is weighing on sentiment for consumers and businesses and renewing concern that aggressive Fed policy could push the U.S. into recession."

Ahead of this data point and the Fed's policy meeting, markets are likely to stay volatile. Investors have options for riding out the market's twists and turns, and one of the better ones is to focus on reliable equity income stocks. There's no shortage of dividend-paying names on Wall Street, including those that issue monthly dividends. But what better way to find the cream of the crop than by looking at the Dividend Aristocrats? These S&P 500 stocks have earned their stripes by consistently raising annual distributions for at least 25 years without interruption. Investors wanting to add income stability to their portfolios amid an unstable market will certainly want to check out this list.

Karee Venema
Contributing Editor, Kiplinger.com