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Dow drops 300 points as Wall Street finishes its third consecutive week in the red

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Dow drops 300 points as Wall Street finishes its third consecutive week in the red and summer gains fade away

  • Wall Street ended its third consecutive week in negative territory on Friday
  • Early gains from a solid jobs report were wiped out by news from Europe
  • Russia’s state-owned Gazprom threatened indefinite shutdown of key pipeline 
  • Nearly half the gains from July’s market rally have now faded away

US stocks closed out the trading week on a down note on Friday, marking Wall Street’s third consecutive negative week as roughly half the gains from the summer’s market rally dissipate. 

At the closing bell, the Dow Jones Industrial Average was down 337.98 points, or 1.1 percent, to 31,318.44 after losing 3 percent for the week.

The S&P 500 dropped 1.1 percent on the day and 3.3 percent for the week, while the Nasdaq Composite finished its sixth consecutive session in the red, losing 1.3 percent for the day and 4.2 percent for the week. 

Wall Street had opened sharply higher after the August jobs report showed relatively strong hiring, but the gains were quickly erased following new developments in the European natural gas crisis.

At the closing bell, the Dow Jones Industrial Average was down 337.98 points, or 1.1%

At the closing bell, the Dow Jones Industrial Average was down 337.98 points, or 1.1%

Europe’s energy crisis loomed larger after Russian energy giant Gazprom said it couldn’t resume the supply of natural gas through a major pipeline to Germany for now. 

The Russian state-run energy company had shut down the Nord Stream 1 pipeline on Wednesday for what it claimed would be three days of maintenance.

It then said in a social media post Friday that it had identified ‘malfunctions’ of a turbine and added that the pipeline would be taken offline indefinitely for maintenance.

‘Definitely the afternoon overshadowing the good data from this morning, the afternoon has been stolen from us by those headlines out of Europe,’ said Zach Hill head of portfolio management at Horizon Investments in Charlotte, North Carolina.

‘The setup is important, there has been some optimism around the European energy situation over the last week or so, long-dated power prices falling almost in half in some instances and signs that Germany had almost 80 percent of their storage full of gas, so what we are seeing is a little positioning adjustment against that backdrop coupled with a low liquidity Friday afternoon into a holiday weekend,’ said Hill.

Europe's energy crisis loomed larger after Russian energy giant Gazprom said it couldn't resume the supply of natural gas through a major pipeline to Germany

Europe’s energy crisis loomed larger after Russian energy giant Gazprom said it couldn’t resume the supply of natural gas through a major pipeline to Germany 

Analysts also pointed to thin trading volumes ahead of the extended holiday weekend helping to exaggerate market moves. 

Markets are closed on Monday for the Labor Day holiday.

Energy was the only major S&P sector to end the session in positive territory on Friday.

The backslide followed positive momentum from Friday morning’s jobs report, which showed stronger-than-expected hiring.

Payrolls topped expectations, and average hourly earnings rose 0.3 percent compared with estimates of 0.4 percent, indicating less wage pressure on inflation.

The unemployment rate edged up to 3.7 percent from a pre-pandemic low of 3.5 percent, indicating that the Fed’s efforts to front-load rate hikes were beginning to take effect.

Wage growth data is seen as important to the Fed’s deliberations on increasing interest rates as the central bank looks to bring inflation, running at four-decades high, back to its 2 percent target.

The focus now shifts to the August consumer price report due mid-month, the last major inflation data available before the Fed’s late-September policy meeting.

Fears of aggressive policy tightening have sent stocks lower after hitting a four-month high in mid-August, with the S&P 500 falling about 4 percent since Fed Chair Jerome Powell’s hawkish remarks last week about rate hikes. 

His views were later echoed by other policymakers.

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