Investors retreated from US stocks on Friday, dumping shares held in large technology companies and sending the tech-heavy Nasdaq Composite Index sharply lower.

Image: Fullerton Markets

The Nasdaq (QQQ, NDX) closed down 1.9%, as a mixed US jobs report was seen as paving the way for more hawkish monetary policy, which would lead to tighter financial conditions and weigh on corporate valuations. The moves came after the Bureau of Labor Statistics’ report showed the US economy added just 210,000 new jobs last month.

While the economy added fewer jobs last month than the 550,000 jobs forecast by economists, the unemployment rate still fell to its lowest level since the pandemic began. Hence, to the Fed, this was not a weak jobs report.

For investors, the data has left the door open to a faster pace of monetary policy tightening. Federal Reserve Chair, Jay Powell, signaled his support for a quicker wind-down of the central bank’s $120 billion-a-month of bond purchases last Tuesday. The program has been a crucial pillar for the rally in equities prices since the depths of the coronavirus crisis last year.

Federal Reserve Chair, Jay Powell, said in testimony before the Senate on Tuesday last week that he no longer viewed inflation as “transitory”, and signaled openness to accelerate the pace of the central bank’s unwinding of crisis-era monetary policy.