US stocks fall as jobs fuel rate hike bets: Markets end

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(Bloomberg) – U.S. stocks fell after the jobs report showed job growth had slowed slightly but remained strong, clearing the way for the Federal Reserve to remain aggressive in its fight against the ‘inflation.

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The S&P 500 and Nasdaq 100 fell for the first time in five days. Treasury yields soared and the two- and 10-year yield curve remained inverted for the fourth day. The Bloomberg Commodity Index is heading for the longest streak of weekly losses since March 2020. The dollar was little changed.

Labor market data showed early signs of a slowdown, but investors are mixed on the report. Bloomberg economists are factoring in the possibility that slightly weaker data will prompt the central bank to return to 50 basis point moves, even after the report showed jobs gains topped analysts’ estimates. Others see the recent data as a signal that recession fears are overblown and say the slowdown may be too modest to shake the Fed.

“The reaction seems a bit instinctive to me,” said Max Gokhman, chief investment officer at AlphaTrAI. “The market’s muscle memory tells him that a strong labor market means more bulls means selling stocks. The reality at this point may become more nuanced, as the Fed is already on its way and we are seeing slowing wage growth, even though jobs are still plentiful. This dynamic can moderate inflation without forcing a deep recession. But to “price” this trend, you have to do more than look at the title. »

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On Thursday, two of the Fed’s most hawkish policymakers backed an interest rate hike of another 75 basis points this month, while dismissing recession fears.

“The economy is slowing down but the Fed wants it to slow down. So I think all the talk of recession is a bit premature right now,” Priya Misra, global head of rates strategy at TD Securities, said on Bloomberg TV. “Inflation is still a problem and the Fed has changed its reaction function, I would say. They are emphasizing – overestimating – headline inflation in the labor market right now. If the labor market slows down, I don’t think the Fed will change its mind.

Here’s what else Wall Street is saying about the U.S. payroll:

  • “Today’s number cements a 75 basis point rise at the next meeting. JOLTS and payrolls paint a consistent picture of a labor market not cooling as quickly as the Fed would like, with private payroll growth actually accelerating in June Wage data also looks very strong under the hood, with non-supervisory salaries rising another 0.5% m/m and 6.4% a/a.” – Aneta Markowska, Chief US Financial Economist at Jefferies

  • “Feels like Wile E. Coyote is running over the cliff, the economy is slowing, the Fed hikes will almost certainly lead to a hard landing, but with employment remaining just as strong and CPI the next week likely to remain high, the risk that the Fed will rise higher and further than it should.- Steve Chiavarone, senior portfolio manager at Federated Hermes

  • “More jobs than expected, but lower participation rate means shortages and supply chain inflation is likely to persist. The data is fueling the Fed’s aggressive rate hike policy. – Bryce Doty, senior vice president at Sit Investment Associates

  • “While the Fed will focus on the fact that the overall unemployment rate remains unchanged (regardless of the wrong reason), today’s number will reinforce the aggressive position it has decided to take and why the yields of the Treasury increases both in the short and long term.” – Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group

  • “Today’s employment numbers should allay fears of an impending recession, but it does nothing to allay fears of further significant Fed tightening,” said Seema Shah, chief global strategist. at Principal Global Investors.

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Earlier, shockwaves rippled through the markets following the assassination of former Japanese Prime Minister Shinzo Abe. The yen fell.

Bitcoin fell, but is trading around $21,000.

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Some of the major movements in the markets:

Shares

  • The S&P 500 fell 0.4% at 9:30 a.m. PT

  • The Nasdaq 100 fell 1%

  • The Dow Jones Industrial Average is little changed

  • The Stoxx Europe 600 has changed little

  • The MSCI World index rose by 1.6%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0167

  • The British pound fell 0.1% to $1.2006

  • The Japanese yen fell 0.3% to 136.41 per dollar

Obligations

  • The yield on 10-year Treasury bills rose five basis points to 3.05%

  • Germany’s 10-year yield fell two basis points to 1.30%

  • The UK 10-year yield rose three basis points to 2.16%

Goods

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