Stocks fall as unemployment rate falls

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Stocks fall as unemployment rate falls

The fall in U.S. stocks fell sharply on Friday after September jobs data showed an unexpected fall in the unemployment rate that was expected to reinforce the Federal Reserve's resolve to tighten monetary policy.

The investors were weighing a profit warning at a leading microchip maker.

The stock market was on track for back-to-back losses, trimming weekly gains.

The Labor Department said in September the U.S. economy added 263,000 jobs, while the unemployment rate declined to 3.5% from an August reading of 3.7%. The average hourly earnings went up by 0.3%.

The September payroll report, while close to consensus, was too strong to allow policymakers much breathing room. Matt Peron, director of research at Janus Henderson Investors, said the likely impact is to keep policy in tighter mode and to keep pressure on risk assets.

We are not out of the woods yet, but we should be closer as the impact of aggressive policy starts to take hold. He said it was too early to go on offense but stay invested, albeit defensively.

Steve Rick, chief economist at CUNA Mutual Group, said the data underlined the labor market's role in the inflation battle.

If unemployment remains low, employers will increase wages to attract talent, creating more disposable income. Increased purchasing power will lead to increased demand for goods and services, spiking prices and potentially causing the Fed to raise rates even more. Federal Reserve Gov. Christopher Waller said late on Thursday that he doesn't think the jobs report will change anyone's thinking at the central bank. The labor market is slowing a bit but is still tight, according to a jobs number of around 260,000 along with the job openings rate reported on Tuesday. He said that I don't expect tomorrow's jobs report to alter my view that we should focus 100% on reducing inflation.

It is in the interest of the Fed not to signal a pivot in policy until it s ready to make one, given its belief that keeping financial conditions tight will help to reduce inflation. John Williams, the New York Fed President, will have the chance to comment on the data when he speaks at 10 a.m.