S&P 500, Nasdaq fall Friday, but notch weekly gains after blowout July jobs report

Warner Brothers Discovery's first earnings report as a merged entity captured the attention of the pros on CNBC. Shares tumbled more than 16% Friday. On the horizon, Disney's quarterly results -- due Wednesday -- are also a major focal point for investors and analysts.

-Darla Mercado, Christina Falso

Stocks ended the first week of August mixed after the better-than-expected July jobs print on Friday. The Dow Jones Industrial Average gained 76.65 points, or 0.23%, to end at 32,803.47. Even with Friday's gains, however, it fell on the week.

The S&P 500 shed 0.16% to end at 4,145.19 and the Nasdaq Composite lost 0.50% Friday, falling to 12,657.56.

Still, both the S&P 500 and the Nasdaq ended the first week of August higher.

—Carmen Reinicke

The gap between 2-year Treasury yields and 10-year Treasury yields snapped to the widest since the year 2000 in Friday trading.

Both yields rose after the strong July jobs report ignited worries the Federal Reserve would be more aggressive about hiking interest rates to combat inflation.

The two yields were about 40 basis points apart, with the 2-year higher than the 10-year. When the shorter duration yield is higher, it is viewed by Wall Street as a recession warning.

"The last time it was this inverted in 2s/10s, you have to go back to 2000, and that was a much different overall rate environment," said Ian Lyngen, head of U.S. rates strategy at BMO. "We got as inverted as negative 56 during that episode."

Treasury yields, which move opposite price, rose sharply Friday after the government reported 528,000 jobs were added in July, more than double what was expected. The 10-year touched a high of 2.86% Friday, while the 2-year was briefly at a high of about 3.24%, according to FactSet.

 "My biggest take away from the depth of the inversion in the yield curve is the market is confident that the Fed's credibility is high. They will continue to hike rates. The risk is it creates a bigger economic headwind than the economy can handle and we end up tipping into a more significant recession," said Lyngen.

—Patti Domm

Oil prices eked out a slight gain on Friday, but ended the week sharply lower as recession fears and concerns around a slowdown in demand weighs.

West Texas Intermediate crude futures, the U.S. oil benchmark, ended the week at $89.01 per barrel, for a gain of 0.53%. But for the week the contract tumbled 9.74% for the worst week since April 1. International benchmark Brent crude ended the week at $94.92 per barrel, for a weekly loss of 13.72%.

— Pippa Stevens

Heading into the last hour of trading in the first week of August the Dow Jones Industrial Average was flat, wavering between gains and losses. The S&P 500 shed about 0.48% and the Nasdaq was down about 0.90%. All three major averages are on track to fall on the week.

Stocks fell after the July jobs report came in much stronger than expected, signaling a more aggressive Fed going forward.

—Carmen Reinicke

Shares of Tesla fell nearly 7% in intraday trading Friday after the company's annual shareholder meeting, which took place on Thursday. Shareholders approved a 3-for-1 stock split, which would make shares more affordable.

Tesla was the biggest laggard in the Nasdaq Composite in the afternoon.

—Carmen Reinicke

Black workers saw unemployment inch slightly higher to 6% in July, while the broader job market saw that rate tick down to 3.5%, according to data from the Bureau of Labor Statistics released Friday.

Broken down by gender, unemployment rose to 5.7% among Black men and declined slightly among Black women (5.3%). Meanwhile, the labor force participation rate, which measures how many people are employed or looking for work, shrunk to 67.3% from 68.1% in June.

Black workers marked the only demographic group that saw the unemployment raise rise in July. While notable, it's difficult to decipher what contributed to these changes among Black workers, said Valerie Wilson, director of the Economic Policy Institute's program on race, ethnicity and the economy.

"I don't know how much of that is a signal of something really changing or just volatility of the data, because the longer term trend had been pretty positive, pretty strong," she said.

At the same time, women continued to make strides in jobs recovery, with the unemployment rate ticking down to 3.1% for those 20 and older. Hispanic women saw the largest decrease in unemployment, which fell to 3.2% from 4.5% in June.

— Samantha Subin

The second-quarter earnings season is winding down with 87% S&P 500 companies having reported results. Among those firms, 75% reported a positive EPS surprise, according to FactSet.

So far, the earnings growth for the S&P 500 is 6.7%. If 6.7% is the actual growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since the fourth quarter of 2020, according to FactSet.

— Yun Li

Don't expect the Fed to slow down on its rate hiking path any time soon, especially after this latest jobs report, according MKM Partners' Michael Darda.

"The jobs and wage numbers seen in July are not what the Fed wants at a time when the economy has overshot its potential and inflation is running at more than 3x the Fed's target," the firm's chief economist and market strategist said. "Bottom line: The Fed will persist in moving the front end of the curve higher until growth momentum is broken and inflation infects lower."

—Fred Imbert

Just three S&P 500 names climbed to 52-week highs Friday, while an additional four stocks hit 52-week lows.

• Enphase Energy hit an all-time high dating back to its IPO in March 2012.
• Constellation Energy reached record levels going back to its spin-off from Exelon in January.
• Jack Henry & Associates traded at an all-time high going back to its IPO in November 1985.

• Baxter traded at lows not seen since June 2017.
• Ball Corp reached lows not seen since March 2020.
• Intel touched a low seen since September 2017.
• Vornado Realty hit levels not seen since April 2009.

—Fred Imbert, Gina Francolla

Shares of Carvana and Cloudflare both popped Friday after reporting quarterly earnings.

Cloudflare jumped more than 25% after its earnings beat Wall Street's expectations. The company also bumped up its full-year 2022 guidance, saying it now expects growth of 48%.

Carvana shares also gained more than 35% even though it reported earnings that fell short of analyst estimates. The company did maintain its full-year outlook, however, saying that current headwinds should turn into tailwinds.

—Carmen Reinicke

Even though the July jobs report signaled no sign of recession and that inflation is still running hot, it's not the last word on the U.S. economy. The Federal Reserve will have three more economic data releases to consider before their Sept. 20-21 meeting, when they're slated to raise interest rates again.

Here's the reports they'll be watching:

• July consumer price index, due Aug. 10
• August jobs, due Sept. 2
• August consumer price index, due Sept. 13

—Carmen Reinicke

Stocks were down midday Friday, though off session lows, as Wall Street digested the July jobs report. The report showed that twice as many jobs were added last month than economists expected, that the unemployment rate declined to 3.5% and that wage growth was stronger than forecast.

The Dow Jones Industrial Average was down 93 points, or 0.28%, while the S&P 500 shed 0.66%. The Nasdaq led losses, down 1.01%.

—Carmen Reinicke

Shares of Global Blood Therapeutics jumped nearly 10% Friday after the Wall Street Journal reported that Pfizer is in advanced talks to buy the company for roughly $5 billion. The company makes a drug for sickle-cell disease which was approved in December.

The stock was halted for trading due to the surge.

—Carmen Reinicke

The S&P 500's bear case could be tested soon, if it closes above a certain level, according to BTIG technical analyst Jonathan Krinsky.

Investors have been debating for weeks whether up moves in the market are the result of a temporary bounce or a more lasting bottom. The three major averages just came off their best month since 2020, but there's been so much pain in the market this year that many people are hesitant to believe the worst is behind them.

If the index hits that key level, "we would have to assume that June was the low for this cycle," Krinsky said.

Read more on CNBC Pro.

— Tanaya Macheel

Shares of Lyft surged more than 14% Friday after the ride-hailing service posted better-than-expected earnings results Thursday. The company posted an unexpected quarterly profit, and saw ridership numbers jump back to levels not seen since before the pandemic.

—Carmen Reinicke

The dollar rallied against a basket of currencies Friday on the back of that jobs report that crushed analyst expectations.

The dollar index traded 0.8% higher at 106.58. Against the yen, the U.S. currency surged 1.7% to 135.10. The euro was also down 0.6% at $1.0178.

—Fred Imbert

Stocks clawed back some of their earlier losses after digesting the better-than-expected July jobs report.

The Dow Jones Industrial Average wavered, fighting to go positive. The S&P 500 and the Nasdaq Composite were down 0.03% and 0.11%, respectively.

While the report signaled that the Federal Reserve will likely continue to raise interest rates aggressively, it also showed that the U.S. economy is not in a recession as the labor market continues to maintain its strength.

A rate rebound is generally positive for banks, as is the U.S. avoiding a recession.

—Carmen Reinicke

The 10-year Treasury yield surged to 2.834% Friday morning following the July jobs report, which came in well above expectations and showed solid job growth in the month. Earlier this month, the 10-year Treasury yield hit 2.5%, its lowest since April, as the bond market worried about a potential recession.

At the same time, the yield on the 30-year Treasury rose to 3.078%. Yields are inverse to price.

—Carmen Reinicke

Bank of America economists added another quarter point of a rate hike into their forecast for Federal Reserve rate hikes this year, after July's strong jobs report.

The firm's economists had been expecting a 50 basis point hike in the fed funds rate for September, followed by a 25 basis point hike in November. They now expect a 50 basis point, or half point, hike in November as well. They left the forecast for a quarter point hike in December unchanged.

A basis point equals 0.01 of a percentage point. The Federal Reserve raised the fed funds target rate by 75 basis points in both June and July.

The fed funds futures market is also pricing in a 75 basis point hike for September, following the report that 528,000 jobs were added in July, more than double what was expected.

—Patti Domm

The much-stronger-than-expected July jobs report caught markets by surprise and has Fed watchers ratcheting up expectations for rate hikes.

The economy added 528,000 jobs in July, more than double expectations. Fed funds futures for October are now pricing in a 72% chance of a 75 basis point hike in September, up from 18% Thursday, according to Peter Boockvar, chief investment officer of Bleakley Advisory Group. (a basis point is 0.01 of a percentage point)

Boockvar said the market is also pricing out some of the rate cutting it expected for next year, and the June, 2023 futures were higher by 25 basis points, putting expectations for Fed funds at 3.54%.

"This is hot. For the Fed, this is another 75 basis point hike," said Diane Swonk, chief economist at KPMG. She said the September rate hike could be 75 basis points now not 50 , based on the jobs report alone."The Fed is dealing with strong demand in a supply constrained economy, and that demand extends to labor," said Swonk.

—Patti Domm

Stocks fell at the opening bell Friday following a better-than-expected jobs report. The Dow Jones Industrial Average fell 217 points or 0.66%. The S&P 500 slipped 0.96% and the Nasdaq Composite shed 1.36%.

—Carmen Reinicke

The stronger-than-expected July jobs report means that the Federal Reserve will likely raise interest rates by three-quarters of a percentage point at its next meeting, as opposed to the half-percentage-point hike markets expected, Seema Shah, chief global strategist at Principal Global Investors, said.

"Today's blow out number means that a 75bps hike in September is almost a done deal. Not only is the labor market undoubtedly still tight, but wage growth is uncomfortably strong," Shah wrote in a Friday note. "The Fed has its work cut out for it to create sufficient slack that could ease price pressures."

"All the jobs lost during the pandemic have now been regained. But while that is positive news, markets will take today's number as a timely reminder that there is significantly more Fed hiking still to come," she said. "Rates are going above 4% - today's number should put to bed any doubters."

—Carmen Reinicke

"This number is extraordinary. We're a growth country. The rest of the world is not," said Jim Cramer on CNBC's "Squawk Box" after the strong report.

But Cramer cautioned about what it means for stock prices and explained why we are seeing the negative reaction in the futures.

"It means that obviously when they (the Fed) come back it stays hot they will do another three-quarters," Cramer said. "That's not what we thought. Remember we kind of bought this market on the idea that they are at 50 (basis points)."

After increasing rates by 0.75 percentage point for a second straight time last week, the central bank will next meet to decide on interest rates in September. Traders hoped they would slow the pace to a half point hike at that meeting. The S&P 500 is up 8% in the past one month through Thursday's close.

—John Melloy

Stock futures fell Friday after the July jobs report came in much stronger than expected, showing more jobs added, a lower unemployment rate and higher wage growth than economists forecast.

Dow futures slipped 231 points, or 0.71%. Futures tied to the S&P 500 fell 1.08% and Nasdaq futures shed 1.33%.

—Carmen Reinicke

The U.S. economy added many more jobs than was expected last month. On Friday, the U.S. government said 528,000 jobs were added in July, easily beating a Dow Jones estimate of 258,000.

To be sure, average hourly earnings were up 5.2% year over year — well above expectations. This could be seen by the market as a sign that inflationary pressures remain strong.

Click here for the full story.

—Fred Imbert

Elon Musk said that he thinks we are past peak inflation, and predicts a mild, 18-month recession ahead.

Musk's comments came at the Tesla 2022 shareholder meeting, held Aug. 4.

"We do get a fair bit of insight into where prices of things are going over time because when you're making millions of cars, you have to purchase commodities many months in advance of when they're needed," he said.

—Carmen Reinicke

Amazon will acquire iRobot for $61.00 per share, the consumer robot company announced on Friday. The all-cash transaction is valued at approximately $1.7 billion, including iRobot's net debt.

Shares of iRobot were halted on the news. The sale price of $61 per share is a 22% premium to Thursday's close of $49.99. Amazon's stock was up about .2% in pre-market trading.

—By Michelle Fox

Shares of DoorDash were up more than 10% in premarket trading Friday after the company reported quarterly results that beat expectations after market close Thursday. The food delivery service said orders grew 23% on the year last quarter, and revenue surged 30%.

The company does expect softer consumer spending in the second half of the year, it said.

—Carmen Reinicke

Oil prices were moderately lower during Friday morning trading on Wall Street and on track for steep weekly losses. Concerns around a slowdown in demand have sent prices tumbling in recent sessions.

West Texas Intermediate crude futures, the U.S. oil benchmark, is down 10.5% for the week, while international benchmark Brent crude has shed 14.5%.

— Pippa Stevens

Cryptocurrencies have slumped this week after a rough start to the month. Bitcoin and Ether are both down about 3% week to date and on pace to post their first negative week in five.

The performance would also be the worst weekly drop since July 1, when Bitcoin lost 8.71% and Ether shed 13%.

—Carmen Reinicke

Shares of Warner Bros. Discovery shed more than 11% in premarket trading Friday after the company announced it would revise its plan for its DC cinematic universe. Earlier in the week, the company scrapped its straight-to-streaming DC film "Batgirl."

—Carmen Reinicke

Stifel's Barry Bannister hiked his S&P 500 target for the second half to 4,400 from 4,200, noting he continues to prefer cyclical growth stocks in sectors such as software and media.

Here are two reasons Bannister gave for his target bump:

• The "S&P 500 sell-off in 1H22 is still being reversed."
• "The S&P 500 also discounts negative y/y S&P 500 EPS in 2022, but we see 2022 EPS holding its own."

Bannister's new target implies 6% upside from Thursday's close.

—Fred Imbert

European markets were flat on Friday morning as investors tracked corporate earnings and awaited the key U.S. jobs report.

The pan-European Stoxx 600 was little changed in early trade. Autos gained 0.8% while insurance stocks fell 0.8%.

Earnings continue to drive individual share price movement in Europe. Allianz, Deutsche Post, the London Stock Exchange Group and WPP were among the companies reporting before the bell on Friday.

- Elliot Smith

Markets in Asia-Pacific rose on Friday as investors shook off fears over China's military exercises near Taiwan, which follow U.S. House Speaker Nancy Pelosi's visit to the self-ruled island this week.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.74%. Mainland China's Shanghai Composite gained 0.28% and the Shenzhen Component increased 0.64%.

The Taiex in Taiwan jumped more than 2%, with chipmaker TSMC rising 2.8%.

Official data show Taiwan depends more on China than the U.S. when it comes to trade. Slightly more than 22% of Taiwan's imports in 2021 were from mainland China and Hong Kong, compared with 10% from the U.S.

Taiwan is a democratic, self-ruled island, but China sees it as a renegade province.

— Abigail Ng, Evelyn Cheng

If Friday's jobs report shows the U.S. economy added fewer workers in July than the previous month, it is not necessarily a sign of economic weakness, according to Brad McMillan, CIO at Commonwealth Financial Network.

"If we do see a reduction in hiring, even at the expected number, it looks much more likely to be due to a shortage of workers, rather than a sudden shock to labor demand," McMillan said in a note. "With demand strong, what matters here is labor availability."

— Yun Li

The Fed's commitment to bring down inflation as well as easing recession fears have sparked a relief rally in the market. The S&P 500 is now 14.2% above its 52-week intraday low of 3,636.87 from June 17. The benchmark index is also coming off its best month since November 2020, gaining more than 9% in July.

However, some on Wall Street are skeptical that the rally can sustain for much longer. Max Kettner, chief multi-asset strategist at HSBC Bank said the comeback is "wishful thinking," and he would need to see further repricing of rate hike expectations and another sharp drop in real yields to believe it.

Widely followed Mike Wilson from Morgan Stanley also called this rally short-lived as corporate earnings are beginning to deteriorating.

— Yun Li

Six out of the 11 S&P 500 sectors were in the green week to date, led by consumer discretionary, which has gained 2.9%.

The most negative sector this week has been energy, which has fallen more than 8% and is on track for its worst week since June 17. The decline in energy names came amid a drop in oil prices. WTI is down over 10% this week, on pace for its worst week since April.

— Yun Li