Financial Markets                      01/10 15:54

   

   NEW YORK (AP) -- U.S. stocks fell Friday on worries that good news on the 
job market may be too good and prove to be bad for Wall Street by keeping 
inflation and interest rates high.

   The S&P 500 tumbled 1.5% to close its fourth losing week in the last five. 
The Dow Jones Industrial Average dropped 696 points, or 1.6%, and the Nasdaq 
composite sank 1.6%.

   Stocks took their cue from the bond market, where yields leaped to crank up 
the pressure after a report said U.S. employers added many more jobs to their 
payrolls last month than economists expected.

   Such strength in hiring is of course good news for workers looking for jobs. 
But it could also keep upward pressure on inflation by keeping the overall 
economy humming. That in turn could dissuade the Federal Reserve from 
delivering the cuts to interest rates that Wall Street loves. Lower rates can 
not only goose the economy but also boost prices for investments.

   The Fed has already indicated it's likely to ease rates fewer times this 
year than it earlier expected because of worries about higher inflation. That's 
in part because some officials are taking seriously the possibility of tariffs 
and other policies coming from President-elect Donald Trump that could worsen 
inflation.

   To be sure, Friday's jobs report may not be as strong as it seems on the 
surface. While the overall number of hires in December blew past expectations, 
"manufacturing is still getting crushed," said Brian Jacobsen, chief economist 
at Annex Wealth Management.

   "The macroeconomy may be fine," he said, "but each individual's microeconomy 
could look very different."

   The raises in pay that workers are getting are also an important data point 
for the Fed, and gains in average hourly earnings were below 4% last month. 
That's what "the Fed wants to see," according to Wells Fargo Investment 
Institute Senior Global Market Strategist Scott Wren.

   The nuanced takes helped Treasury yields give back some of their initial 
bursts following the release of the jobs report. But preliminary results from a 
separate report later in the morning underscored the issue. It suggested U.S. 
consumers are getting more pessimistic about where inflation is heading.

   Consumers are expecting inflation in the coming year to be 3.3%, up from 
their expectation of 2.8% last month. It's the highest reading in the 
University of Michigan's survey since May. Expectations are worsening across 
the board, particularly for households that make less in income, according 
Joanne Hsu, director of the Surveys of Consumers.

   The problem for Wall Street is that when traders were sending U.S. stock 
indexes to dozens of records last year, they were banking on a stream of rate 
cuts coming from the Fed. If fewer cuts materialize than expected, stock prices 
would likely either need to fall, or profits at companies would have to rise 
more strongly to make up for it.

   Smaller companies can take worse hits from higher interest rates than their 
bigger rivals because of the need for many to borrow to grow. The Russell 2000 
index of smaller stocks slumped 2.2%.

   Constellation Brands tumbled 17.1% for the biggest loss in the S&P 500 after 
the seller of Modelo beer and Robert Mondavi wine reported weaker profit and 
revenue for the latest quarter than analysts expected. CEO Bill Newlands said 
the company is seeing subdued spending from its customers, who are looking for 
better values.

   Insurance companies were also under pressure as wildfires continue to burn 
in the Los Angeles area. Many of the homes that have been destroyed were in 
expensive areas where the typical price can top $3 million. Such high-priced 
damage could eat into insurers' profit. Allstate fell 5.6%, Travelers dropped 
4.3% and Chubb lost 3.4%.

   Delta Air Lines was able to fly 9% higher because it delivered a stronger 
profit report for the last three months of 2024 than analysts expected. The 
airline said it's seeing strong demand for travel, which accelerated through 
the end of last year, and it expects that to continue into 2025.

   Big banks will begin reporting their own results for the end of 2024 next 
week, as earnings season gets underway in earnest.

   All told, the S&P 500 fell 91.21 points to 5,827.04. The Dow Jones 
Industrial Average dropped 696.75 to 41,938.45, and the Nasdaq composite sank 
317.25 to 19,161.63.

   In the bond market, the yield on the 10-year Treasury jumped to 4.76% from 
4.68% late Thursday. In September, it was below 3.65%, marking a major move for 
the bond market.

   The yield on the two-year Treasury, which moves more closely with 
expectations for what the Fed will do in the near term, climbed to 4.38% from 
4.27% late Thursday.

   Friday's jobs report means traders see it as a near certainty that the Fed 
will not cut interest rates at its next meeting later this month. That would be 
the first time it's stood pat following three straight cuts to interest rates.

   A growing minority of traders on Wall Street are saying the Fed may not cut 
rates again at all in 2025.

   ___

   AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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