Dollar Rises, Bond Gains Unravel After Jobs Data: Markets Wrap

(Bloomberg) — Treasuries slid and the dollar climbed after stronger-than-expected jobs numbers dampened Wall Street’s confidence that the Federal Reserve’s next interest-rate cut would be a big one. 

Yields on 10-year Treasuries rose to 3.78% after hitting a low of 3.69% in the prior session while the greenback rached nearly a two-week high after the labor readout as traders pondered the scope of the Fed’s next move. 

Stocks struggled to find solid footing as the market attempted to buck Tuesday’s risk-off slump after tensions flared in the Middle East. The S&P 500 fell 0.1%. 

Listen and follow The Big Take on Apple Podcasts, Spotify or wherever you get your podcasts

Data Wednesday showed US companies added more jobs than expected last month, at odds with other indicators that show a cooling labor market. Investors are awaiting Friday’s nonfarm payrolls numbers for a gut check on the health of the US economy.

“Today’s ADP employment number surprised to the upside, suggesting the labor market is bending but not breaking,” said Chris Larkin at E*Trade from Morgan Stanley. “Friday’s monthly jobs report will have the final word on the current jobs picture, and more than likely, on near-term market sentiment.”

The report won’t take a half point cut off the table, according to Bank of America Corp. strategists led by Meghan Swiber. 

“Even if the labor market surprises to the strong side, pricing will still maintain optionality,” they wrote.

To Marc Rowan, the chief executive officer of Apollo Global Management Inc., the Fed’s aggressive policy easing threatens to overstimulate the economy. 

“It is not clear we need more rate cuts,” he said in an interview with Bloomberg Television, pointing to ready financing and rising real estate prices.  

Traders also have to contend with flaring tensions in the Middle East after Israel vowed to retaliate against a missile barrage from Iran. WTI crude trimmed gains following an unexpected rise in US inventories that counterbalanced the rising tensions. 

Wall Street’s fear gauge — the VIX — hovered near a critical level indicative of more volatility ahead after Tuesday’s flight to safety.

“Clearly there is a lot of uncertainty,” Anna Rosenberg, head of geopolitics at Amundi Asset Management, told Bloomberg Television. “The market is still very much operating in the base-case expectation that it remains more or less contained and doesn’t spiral out in an all-out war. And I think right now, that is the right thing to do.”

For stock bulls keeping crude costs in check will be key.

“As long as oil prices remain below $100 per barrel and corporate profits remain strong, that is supportive of higher stock prices,” according to Mary Ann Bartels, chief investment strategist at Sanctuary Wealth. 

She expects the S&P 500 to reach 6,000 before the end of the year, “as interest rates continue to move lower and the consumer remains strong and is still spending.”

In company news, shares of Humana Inc. cratered after a drop in the health insurer’s Medicare quality ratings while Nike Inc.’s stock slid after the athletic wear company withdrew its full-year sales guidance. Tesla Inc. fell 3.8% after its quarterly vehicle sales disappointed.

Meanwhile, the Japanese yen fell against the dollar following comments from Prime Minister Shigeru Ishiba, who said conditions weren’t right for the Bank of Japan to move again following two interest rate hikes earlier this year. 

Chinese stocks listed in Hong Kong jumped the most in almost two years after Beijing followed other major cities in relaxing home purchase rules. The massive stimulus efforts announced by China’s leaders last week turbocharged local assets and helped lift markets overseas.

Key events this week: 

• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday
• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 1:32 p.m. New York time
• The Nasdaq 100 rose 0.1%
• The Dow Jones Industrial Average was little changed
• The MSCI World Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.2% to $1.1046
• The British pound fell 0.1% to $1.3268
• The Japanese yen fell 1.8% to 146.12 per dollar

Cryptocurrencies

• Bitcoin rose 1.3% to $61,600.68
• Ether fell 0.2% to $2,446.7

Bonds

• The yield on 10-year Treasuries advanced five basis points to 3.78%
• Germany’s 10-year yield advanced six basis points to 2.09%
• Britain’s 10-year yield advanced eight basis points to 4.03%

Commodities

• West Texas Intermediate crude rose 0.5% to $70.16 a barrel
• Spot gold fell 0.5% to $2,649.66 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rob Verdonck, Winnie Hsu, Margaryta Kirakosian and Allison McNeely.

©2024 Bloomberg L.P.