There’s good news for stock investors: The market is off to its best start in years. Now for the bad: Stock indexes have fallen every day this week, signaling that the rally may be winding down.
The Dow Jones Industrial Average closed down 22.99 points, or 0.1%, at 25.450.24 Friday, in its fifth straight day of declines. While the Dow recovered somewhat in its last hour from earlier losses--following a jobs report that showed hiring in the U.S. fell to its weakest level in more than a year--the index still posted a loss on the day.
Meanwhile, S&P 500 Index fell 0.2% to 2743.07, and the Nasdaq Composite Index also declined 0.2% to 7408.14.
The Labor Department said Friday that non-farm payrolls increased by 20,000 last month, slower than the 311,000 new jobs created in January and also below the consensus forecast among economists of 180,000 new jobs. While the lower-than-expected growth may presage a tapering off of recent years’ job boom, there was also encouraging news: The unemployment rate fell to 3.8%, close to a five-year low, while hourly earnings rose a better-than-forecast 3.4% in February.
Marking what by some measures was its strongest start to a year since 1987, the Dow peaked at 26,241.42 on Feb. 25. This zenith came as two big clouds hanging over the market in late 2018 cleared up: the Fed’s willingness to raise interest rates through 2019 and a looming U.S.-China trade war. But as the Fed took a more dovish view on interest rates and trade talks eased trans-Pacific tensions, stock prices rebounded.
Yet even as markets rallied, some investors and strategists worried that the rebound was coming “too far, too fast.” With the news of trade talks and interest rates already priced into most stocks, the market lacked a new impetus to push prices higher. Friday’s lack of clarity about future job growth only add to that uncertainty.
Other signs indicate that the strong economic growth the U.S. has enjoyed for years may be waning. The GDPNow economic model from the Federal Reserve Bank of Atlanta predicts that U.S. gross domestic product will slow to 0.5% this quarter after rising 2.9% in 2018. Goldman Sachs also warned this week of a “GDP pothole” that could slow economic growth early this year.