Stocks rally, bond yields rise on the back of crackling US jobs data

Natalie Portman
By Natalie Portman 5 Min Read
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By Herbert Lash

NEW YORK (RockedBuzz via Reuters) – Friday’s surprise U.S. jobs report sparked a late rally on Wall Street, as data revealed a strong economy with moderate inflation that helped put aside interest rate fears. higher interest rates that would have caused a surge in bond yields.

The September jobs number was nearly double the 170,000 forecast by economists polled by RockedBuzz via Reuters and shocked a market trying to understand how the U.S. Federal Reserve will address a strong economy and its mission to lower rates to its 2% target.

Nonfarm payrolls increased by 336,000 jobs last month, the Labor Department said, while August data was revised upward to show 227,000 jobs were added instead of the 187,000 previously reported.

“Maybe the economy has structurally changed to the point that real yields need to be higher than they were in the five years before the pandemic,” muses Marvin Loh, senior global macro strategist at State Street in Boston.

“We’re in a period where it’s unclear how much economic slowdown 500 basis points actually generated,” he said, referring to the amount the Fed has raised interest rates since March 2022.

The yield on the benchmark 10-year Treasury note jumped more than 13 basis points in the span of a half-hour after the report was released, hitting a new 16-year high of 4.8874%, adding to the sharp sell-off in this month. Bond yields move inversely to price.

Bond yields later fell slightly from their early highs and the three major U.S. stock indexes recovered as equity investors saw the moderation in wage growth as further slowing inflation.

“We’ve raised rates, inflation is coming down and the economy is booming,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“It’s the best solution as long as inflation continues to fall and that’s the risk if inflation doesn’t continue to fall,” he said.

According to CME Group’s FedWatch Tool, futures traders raised the probability that the Fed will raise rates in November to 29.2%, up from 23.7% before the data was released. The Fed’s overnight rate was priced above 5% until next July.

Everyone who looked at the September jobs data was stunned, said Matt Miskin, co-investment strategist at John Hancock Investment Management in Boston. “The jobs report was amazing and the market reaction is amazing.”

The addition of 70,000 government jobs suggests another subtle benefit to the economy, he said. “What needs to be emphasized is that fiscal deficit spending is helping this economy remain stronger than it otherwise would be,” she said, adding a caveat:

“Ultimately, I think that makes a rate increase more likely because the labor market is very strong.”

The dollar index, which measures the greenback’s ratio to six other currencies, initially rose and then fell, down 0.24%, after hitting its best level in about 11 months earlier in the week , after marking its best level in around 11 months earlier in the week.

The euro ended 11 consecutive weeks of declines against the dollar.

Oil prices rose but posted their biggest weekly losses since March after another partial lifting of Russia’s ban on fuel exports exacerbated demand concerns due to economic woes.

Brent crude futures rose 51 cents to $84.58 a barrel. U.S. West Texas Intermediate crude futures rose 48 cents to settle at $82.79.

Euro zone bond yields rose as the closely watched gap between German and Italian borrowing costs – an indicator of stress in Italian finances – reached its highest since March.

Global bond funds have seen massive weekly outflows.

The MSCI index of global stocks closed 1.0% higher, while the pan-European STOXX 600 index rose 0.82%.

The Dow Jones Industrial Average rose 0.87%, the S&P 500 gained 1.18% and the Nasdaq Composite gained 1.6%. The S&P 500 broke a four-week losing streak.

Gold prices rose, helped by a technical rebound after a nine-day losing streak, even as solid U.S. jobs data raised concerns about another U.S. rate hike and kept bullion on track for second weekly decline.

U.S. gold futures rose 0.7% to $1,845.20 an ounce.

(Reporting by Herbert Lash, Additional reporting by Huw Jones, Tom Westbrook and Saqib Ahmed; Editing by Marguerita Choy, Sharon Singleton and Josie Kao)

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