Stocks lose more ground on fears a recession may be looming
NEW YORK (AP) — Good news on the economy remains bad news for Wall Street, as stocks fell sharply Friday on worries a still-strong U.S jobs market may actually make a recession more likely.
The S&P 500 ended 2.8% lower after briefly dropping 3.3% as traders weighed a government report showing employers hired more workers last month than economists expected. The Dow Jones Industrial Average fell 2.1% and the Nasdaq composite lost 3.8%.
Wall Street is worried the Federal Reserve could see that as proof the economy has yet to slow enough to get inflation under control. That could clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely.
“The employment situation is still good and that might be a little frustrating to the Fed,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments. “The Fed thinks we need more people unemployed in order to make sure inflation comes down and stays down.”
Stocks have tumbled over 20% from records this year on worries about inflation, interest rates and the possibility of a recession.
The major indexes managed to notch a gain for the week, thanks to a powerful but short-lived rally Monday and Tuesday after some investors squinted hard enough at some weaker-than-expected economic data to suggest the Fed may take it easier on rate hikes. But Friday’s jobs report may have dashed such hopes for a “pivot” by the Fed. It’s a pattern that has been repeated several times this year.
“For for a lot of this a year, there really has been a degree of false optimism among many investors that the Fed would would tap the brakes and pivot sooner than they’ve been telling us they will for quite some time,” Bill Merz, head of capital market research at U.S. Bank Wealth Management.
“The market is increasingly coming to terms with, albeit gradually, that the Fed is highly unlikely to pivot in the near-term as some have been hoping for.”
Employers added 263,000 jobs last month. That’s a slowdown from the hiring pace of 315,000 in July, but it’s still more than the 250,000 that economists expected.
Also discouraging for investors was that the unemployment rate improved partly for the wrong reasons. Among people who aren’t working, fewer than usual are actively looking for jobs. That’s a continuation of a longstanding trend that could keep upward pressure on wages and inflation.
“We are not out of the woods yet, but should be getting closer as the impact of aggressive policy starts to take hold,” said Matt Peron, director of research at Janus Henderson Investors.
By hiking interest rates, the Fed is hoping to slow the economy and jobs market. The plan is to starve inflation of the purchases needed to keep prices rising even further. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. The risk is that if the Fed goes too far, it could squeeze the economy into a recession. In the meantime, higher rates push down on prices for stocks, cryptocurrencies and other investments.
“Everything hinges on inflation at this point,” said Peter Essele, head of portfolio management for Commonwealth Financial Network. “We do think its going to moderate over the next few quarters.”
Altogether, many investors see Friday’s jobs data keeping the Fed on track to hike its overnight rate by three-quarters of a percentage point next month. It would be the fourth such increase, which is triple the usual amount, and bring the rate up to a range of 3.75% to 4%. It started the year at virtually zero.
Crude oil, meanwhile, had its biggest weekly gain since March. Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel Friday. Brent crude, the international standard, rose 3.7% to settle at $97.92.
They’ve shot higher because big oil-producing countries have pledged to cut production in order to keep prices up. That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.
The rise for crude helped stocks of oil-related companies to be among Wall Street’s very few to rise Friday. Oilfield services provider Halliburton climbed 2%.
Stocks of technology companies led the way in the opposite direction. They’ve been among the hardest hit by this year’s rising rates, which most hurt investments seen as the riskiest, most expensive or having to make investors wait the longest for big growth.
Microsoft slumped 5.1%, and Amazon fell 4.8%.
All told, more than 90% of stocks in the S&P 500 closed lower Friday. The index fell 104.86 points to 3,639.66. It ended with a 1.5% gain for the week, its first weekly gain in four weeks.
The Dow dropped 630.15 points to 29,296.79, while the Nasdaq lost 420.91 points to close at 10,652.40.
Smaller company stocks also gave up more ground. The Russell 2000 index fell 50.36 points, or 2.9%, at 1,702.15.
Beyond higher interest rates, analysts say the next hammer to hit stocks could be a potential drop in corporate profits. Companies are contending with high inflation and interest rates eating into their earnings, while the economy slows.
Advanced Micro Devices fell 13.9% after it warned revenue for its latest quarter is likely to come in at $5.6 billion, below its prior forecasted range of $6.5 billion to $6.9 billion. AMD said the market for personal computers weakened significantly during the quarter, hurting its sales.
Levi Strauss fell 11.7% after it cut its financial forecast for its fiscal year. It cited the surging value of the U.S. dollar against other currencies, which weakens the dollar value of sales made abroad, as well as a more cautious outlook on economies across North America and Europe.
Treasury yields rose immediately after the jobs report’s release, though they wobbled a bit afterward. The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, climbed to 3.88% from 3.83% late Thursday.
The two-year yield, which more closely tracks expectations for Fed action, rose to 4.30% from 4.26%. Earlier in the morning, it climbed above 4.33% and was near its highest level since 2007.
AP Business Writers Damian J. Troise, Joe McDonald and Matt Ott contributed. Veiga reported from Los Angeles.
Stan Choe And Alex Veiga, The Associated Press
Canada under pressure to produce more food, protect agricultural land: report
A field of wheat is pictured near Cremona, Alta., Tuesday, Sept. 6, 2022. Canada’s agricultural land is under increasing pressure as demand for food grows domestically and internationally while the industry grapples with limited resources and environmental constraints, a new report found. THE CANADIAN PRESS/Jeff McIntosh
By Rosa Saba
Canada’s agricultural land is under increasing pressure to produce more food as demand grows domestically and internationally, while the industry grapples with limited resources and environmental constraints, a new report found.
“We need to grow more food on less land and in a volatile climate,” said Tyler McCann, managing director of the Canadian Agri-Food Policy Institute.
The report by the institute released Thursday looks at the pressures on Canada’s agricultural land to produce more food while also mitigating and adapting to the effects of climate change, said McCann.
Despite Canada being a big country, it doesn’t have as much agricultural land as people might think, said McCann, with the report noting that agricultural land makes up only around seven per cent of the country.
Because of that, we can’t take what we do have for granted, he said. “We need to be really thoughtful about how we are using our agricultural land.”
In 2020, Canada was the eighth largest country in terms of cropland area, the report said, with that cropland decreasing by seven per cent over the previous two decades.
Canada is a major producer and net exporter of agriculture and agri-food products, the report said, exporting $91 billion in products in 2022, and one of the top 10 exporters of wheat, canola, pulses, pork and beef.
In the coming years, Canada will face increased demand from countries whose populations are growing, the report said.
“With population growth on one side and climate change on the other, Canada will be amongst an increasingly smaller number of countries that is a net exporter,” said McCann, noting that Canada’s own population is growing, and farmland also needs to be protected against urban sprawl.
The wildfires clouding Canadian skies this week are a “vivid reminder” of the pressure that extreme weather and the changing climate are putting on the agricultural sector, said McCann.
“We need to clearly mitigate … agriculture’s impact on climate change. But we also need to make sure agriculture is adapting to climate change’s impacts,” he said.
One of the ways the world has responded to demand for increased agricultural production over time is to create more agricultural land, in some cases by cutting down forests, said McCann. But that’s not a viable option for Canada, which doesn’t have a lot of land that can be sustainably converted into farmland — and even if it could, doing so could have a variety of adverse environmental effects, he said.
Some of the practices used to reduce emissions and sequester carbon in agriculture can also improve production output on existing farmland, the report found, such as precision agriculture and no-till practices.
However, intensifying the production of current agricultural land also comes with potential environmental downsides, the report said.
For example, McCann said fertilizer is an important part of sustainable agriculture, but there’s a balance to be struck because excessive use of fertilizer can quickly turn food production unsustainable.
“We need to be a lot more thoughtful about the inputs that we’re using,” he said, adding the same can be said about the use of technology in agriculture and the policies and programs put in place to encourage sustainable intensification of Canadian agriculture.
The report recommends that Canada adopt policies that provide financial incentives and technical assistance to farmers and develop regulatory frameworks promoting sustainable land use, as well as promoting education and awareness campaigns, so that the country can “ensure the long-term sustainability of its agricultural sector while protecting the environment.”
This report by The Canadian Press was first published June 8, 2023.
WestJet to wind down budget airline Swoop, integrate it into main operation
WestJet will wind down its Swoop subsidiary by late October as it integrates the budget carrier’s operations into its main banner, the airline said Friday.
The move comes after pilots with the two airlines ratified a new collective agreement that brings them onto a level pay scale.
WestJet CEO Alexis von Hoensbroech said he mulled keeping Swoop separate, but that higher wages for its flight crews made the option less realistic.
“We were prepared for both possible outcomes, and then decided that, provided the overall didn’t make sense, we’re actually ready to integrate Swoop into the mainline business,” von Hoensbroech said in a phone interview from WestJet’s Calgary headquarters.
Each trip by planes in the carrier’s 180-plus fleet will offer a portion of ultra-low-cost fares by Oct. 29, the day after Swoop ceases to fly, he said.
“We are actually broadening our ultra-low-cost reach to a much, much broader network than we could have ever covered with Swoop. So therefore we actually see this as an advantage and as an increased footprint for the ultra-low-cost offering in Canada.”
Pilots of WestJet and Swoop secured a 24 per cent hour pay bump over four years under a deal agreed on tentatively last month that narrowly averted a strike.
Bargaining came down to the wire, with WestJet cancelling more than 230 flights in preparation for job action before a deal was reached hours ahead of the strike deadline on May 19.
Competition for budget airfares has grown in recent years, particularly in Western Canada, as upstarts Flair Airlines and Lynx Air challenged Swoop for market share on key routes.
“The market has become pretty competitive,” von Hoensbroech said, but insisted Swoop’s integration strengthens its grip on discount offerings, rather than marking a retreat.
The company said no layoffs are expected from the integration, with all Swoop employees slated to move to the mainline.
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