(Bloomberg) — Wall Street got a reality check, with data showing a hot labor market that will likely keep the Federal Reserve on its aggressive hiking trail. Those bets sent stocks tumbling and drove 10-year US yields to their longest weekly up streak since 1984.
Most Read from Bloomberg
Biden Says Putin Threats Real, Could Spark Nuclear ‘Armageddon’
Stock Traders Hit Sell Button on Hawkish Fed Bets: Markets Wrap
Biden Should Hit Saudi Arabia Where It Really Hurts
Kremlin Lets State Media Tell Some Truths About Putin’s Stalling War
Musk's Twitter Takeover Hits Snag Over Debt-Financing Issue
To David Donabedian at CIBC Private Wealth US, the report puts an “an exclamation point” on the idea that the market-bottoming process is going to be “a long one”. In this “bizarro world” of big hikes, traders may see the solid data as a reason to brace for turmoil, says Callie Cox of eToro. The conclusion for Brown Brothers Harriman’s Win Thin is that a 75-basis-point Fed boost in November is a “done deal,” with another increase of that size in December becoming a “real possibility.”
Almost 95% of the companies in the S&P 500 fell. The slide came just a few days after the gauge notched its biggest back-to-back rally since the onset of the pandemic amid a debate on whether the Fed would be closer to “peak hawkishness.” Those gains gave the measure its best week in a month even with the post-jobs plunge. The Nasdaq 100 sank nearly 4% Friday.
Ten-year yields approached 3.9% amid their 10th consecutive weekly rise. The dollar advanced. The swap contract for the November Fed meeting priced in nearly 75 basis points of tightening. Market-implied expectations for where the rate will peak also increased, with the derivative contract for the March gathering trading around 4.66%. The current range for the benchmark rate stands between 3% and 3.25%.
Resolutely Hawkish
Fed Bank of New York President John Williams said rates need to rise to around 4.5% over time, but the pace and ultimate peak of the tightening campaign will hinge on how the economy performs. Several officials, in separate remarks this week, delivered a resolutely hawkish message that price pressures remain elevated and they won’t be deterred from raising rates by volatility in financial markets.
Former Treasury Secretary Lawrence Summers said it’s important for the Fed to deliver on the further monetary tightening it has signaled, even in the face of financial risks stemming from its actions.
All eyes will now be on next week’s US inflation data after a hotter-than-expected reading in August tempered hopes of a nascent slowdown. Separately, minutes from the Fed’s September meeting will give clues into the central bank’s tolerance for economic pain.
Amid fears of a looming recession, investors poured the most money into cash since April 2020, but stocks could see further declines as they don’t fully reflect that risk, according to Bank of America Corp. strategists. Their report cited EPFR Global data showing cash funds received nearly $89 billion in the week through Oct. 5 — while investors withdrew $3.3 billion from global stock funds.
Wall Street is “rebelling against” policy tightening, the strategists led by Michael Hartnett wrote before the labor-market report.
From a technical perspective, the fact that the S&P 500 remains oversold enough alongside bearish sentiment may warrant “more rally efforts” that could materialize as early as next week, according to Dan Wantrobski at Janney Montgomery Scott.
“The data being reported alongside our proprietary cycle work to date gives us confidence that we are on the right track in anticipating more of a ‘U’-shaped market bottom and recovery in the months ahead (into 2023),” he added. “We believe the floor will be established at some point in the weeks/months ahead — but for now, investors should continue to expect a very choppy glide path due to significant macro overhang.”
More comments on jobs:
Jeffrey Roach, chief economist at LPL Financial:
“In a word: ‘frustrating.’ As long as job gains are strong, the markets should expect aggressive rate hikes by the Federal Reserve.”
Michael Shaoul, chief executive officer at Marketfield Asset Management:
“This report should keep expectations of any ‘dovish pivot’ at bay, and underlines our concerns that any shift in policy is much more likely to be provoked by much worse financial market conditions than a soft landing in the underlying US economy.”
Shawn Cruz, head trading strategist at TD Ameritrade:
“The market has been in a ‘bad-news-is-good-news’ mentality and there’s really no bad news in this report. It’s a solid jobs report, but it’s not what the market wants to see because it doesn’t give the Fed a reason to pause or shift away from its hawkish intentions.”
Ronald Temple, managing director at Lazard Asset Management:
“While job growth is slowing, the US economy remains far too hot for the Fed to achieve its inflation target. The path to a soft landing keeps getting more challenging. If there are any doves left on the FOMC, today’s report might have further thinned their ranks.”
Seema Shah, strategist at Principal Global Investors:
“Today’s job number is a hawkish reading. With the Fed’s dot plot pointing to policy rates closer to 5% than 4% next year, we have a market that is wishing for the economy to slow quickly. That’s when you know there is only one path ahead: risk assets have further to fall.”
Ian Lyngen, head of US rate strategy at BMO Capital Markets:
“On net, it was a strong enough read to keep a 75 bp Nov hike as the path of least resistance, but the deceleration in wage growth YoY adds to the case for a slowed hiking pace to 50 bp in December, and we still expect the final 25 bp hike in February to reach terminal.”
Some of the main moves in markets:
Stocks
The S&P 500 fell 2.8% as of 4 p.m. New York time
The Nasdaq 100 fell 3.9%
The Dow Jones Industrial Average fell 2.1%
The MSCI World index fell 2.4%
Currencies
The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.5% to $0.9739
The British pound fell 0.7% to $1.1080
The Japanese yen fell 0.2% to 145.36 per dollar
Cryptocurrencies
Bitcoin fell 2.9% to $19,461.43
Ether fell 2.7% to $1,327.55
Bonds
The yield on 10-year Treasuries advanced six basis points to 3.89%
Germany’s 10-year yield advanced 11 basis points to 2.19%
Britain’s 10-year yield advanced seven basis points to 4.24%
Commodities
West Texas Intermediate crude rose 4.6% to $92.48 a barrel
Gold futures fell 1% to $1,703 an ounce
Most Read from Bloomberg Businessweek
The Massive Gas Field That Europe Can’t Use
Even After $100 Billion, Self-Driving Cars Are Going Nowhere
Hackers Target Eager Homebuyers With a Dumb Scam That Keeps Working
‘I Am Energy’: Inside the Bang Billionaire’s Reeling Empire
©2022 Bloomberg L.P.
Related Quotes
Alphabet (GOOGL) Google's latest device launches strengthen its hardware business and device strategy.
A stock market rally attempt survives a volatile week, but lays out clear lines of caution as Q3 reporting season bears down.
The stock market had a brutal sell-off after the stronger-than-expected September jobs report shook investors. Oil and medical stocks remained strong.
The billionaire and the social-media company are discussing the mechanics of closing the deal, sources say.
The major stock market indexes were down for a second day in a row. A mobile storage unit stock and energy stock broke out of bases, triggering buy points on their charts.
AMD, Nvidia Corp, Intel Corp, Qualcomm Inc and Micron Technology Inc were down between 1.2% and 6.0%, weighing on smaller peers such as Marvell Technology Inc and Applied Materials Inc. Samsung, the world's top maker of memory chips, smartphones and televisions, is a bellwether for global consumer demand and its disappointing preliminary results add to a flurry of earnings downgrades and gloomy forecasts.
In the first and likely only debate for the Arizona Senate race, Democrat Mark Kelly pitched himself to independent voters as someone who can stand up to President Joe Biden and his own party, particularly on border security. "When Democrats are wrong, like on the border, I call them out on it, because I'm always going to stick up for Arizona," Kelly said in his opening remarks on stage at Arizona State University's downtown campus on Thursday. "When the Biden administration refused to increase oil and gas production, I told him he was wrong," he offered at another point.
Economists feared the slower yet sturdy job gains would signal that inflation wasn't under control and spur the Fed to continue aggressive rate hikes.
The chip sector melted down Friday for its third 6% one-day drop of the year after U.S. regulators moved to pump the brakes on China's military ambitions as it issued wider restrictions on semiconductor and AI technology that can be sold to the world's second-largest economy.
(Bloomberg) — Taiwan Semiconductor Manufacturing Co. reported higher-than-expected quarterly revenue, signaling the chip giant is benefiting from market share gains to weather an industry slowdown.Most Read from BloombergBiden Says Putin Threats Real, Could Spark Nuclear ‘Armageddon’Stock Traders Hit Sell Button on Hawkish Fed Bets: Markets WrapBiden Should Hit Saudi Arabia Where It Really HurtsKremlin Lets State Media Tell Some Truths About Putin’s Stalling WarMusk's Twitter Takeover Hits Snag
Letters to the Editor: Want to be pro-life? Then you must be pro-reproductive rights, pro-health care, pro-availability of contraceptives, and pro-sex education.
A weekly look at the most important moves and news in crypto and what's on the horizon in digital assets.
Few people command the attention of Wall Street professionals and everyday investors quite like billionaire Warren Buffett. Since taking the reins of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) in 1965, the Oracle of Omaha, as he's come to be known, has created more than $615 billion in value for shareholders and generated an aggregate return on his company's Class A shares (BRK.A) of 3,641,613%. In other words, there's plenty of reason for Wall Street and investors to pay attention to what Buffett is buying, selling, and holding.
A selloff for the ages in the bond market has yields flirting with crisis levels. Bond investors aren't all convinced that's enough for what comes next.
“The Governor agrees that no one should be in jail simply because of possession of marijuana,” a spokesperson for Gov. Andy Beshear said.
(Bloomberg) — US equity earnings are behaving similarly to the run-up to previous recessions, tallying with multiple leading indicators showing the US is on track for an economic slump.Most Read from BloombergBiden Says Putin Threats Real, Could Spark Nuclear ‘Armageddon’Stock Traders Hit Sell Button on Hawkish Fed Bets: Markets WrapBiden Should Hit Saudi Arabia Where It Really HurtsKremlin Lets State Media Tell Some Truths About Putin’s Stalling WarMusk's Twitter Takeover Hits Snag Over Debt-F
Typically the catalyst for these failed bounces has been anticipation that an economic report or the Fed itself would hint at some sort of dovish change of course. The bulls keep hoping that there will be data that will give the Fed a reason to relent. The bulls have been quite optimistic about this, even though a dozen Fed members have made it very clear that they are not going to be swayed by one or two soft reports.
DWAC stock dropped Friday as the beleaguered SPAC seeks a deadline extension to complete its merger with Donald Trump's social media platform.
(Bloomberg) — Technology stocks are facing more pain after chipmaker Advanced Micro Devices Inc. revived fears about the upcoming earnings season after warning that third-quarter sales were softer than expected.Most Read from BloombergBiden Says Putin Threats Real, Could Spark Nuclear ‘Armageddon’Stock Traders Hit Sell Button on Hawkish Fed Bets: Markets WrapBiden Should Hit Saudi Arabia Where It Really HurtsKremlin Lets State Media Tell Some Truths About Putin’s Stalling WarMusk's Twitter Take
WASHINGTON (Reuters) -After a drop in job vacancies, a dip in rental costs and signs of growing consumer caution seemed to show the Federal Reserve's strict monetary medicine beginning to kick in, a strong September jobs report has left policymakers waiting for clearer signs their efforts to cool the economy are working. The Labor Department's report, which showed a gain of more than a quarter of a million jobs, a drop in the unemployment rate, and continued healthy wage growth, points to a job market U.S. central bank officials will likely continue to see as out of line with declining inflation. Job creation is slowing – a bit – and wage growth is ebbing – a touch.