Stocks, Yields Rise as Traders Rethink Fed’s Path: Markets Wrap

This content was published on October 4, 2024 - 18:34

4 minutes

(Bloomberg) — Treasuries sank after a stronger-than-expected jobs report forced traders to temper their bets on the size of the Federal Reserve’s next rate cut. Stocks remained modestly higher after the data underlined the resilience of the US economy and boosted soft-landing hopes.

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The policy-sensitive two-year US Treasury yield touched 3.90% while the 10-year rate jumped to 3.97% after employers added 254,000 jobs in September, the most in six months. The unemployment rate fell to 4.1%. Traders are now pricing in less than a quarter-point worth of easing in November.

The S&P 500 and the Nasdaq 100 trimmed earlier gains as concerns that inflation may still be entrenched continue to linger. Apart from Friday’s labor-market report, a slew of other economic data this week — including private-sector job numbers and a measure of the services sector — painted a picture of a strong US economy.

“This report may actually bring the Fed’s dual mandate back into balance,” said Lindsey Bell, chief investment strategist of 248 Ventures, adding that wage increases will likely remind the central bank “that inflation can remain sticky.”

Mohamed El-Erian also warned that the Fed’s fight against inflation isn’t over.

“This is not just a solid labor market, but if you take these numbers at face value, it’s a strong labor market late in the cycle,” El-Erian, the president of Queens’ College, Cambridge, told Bloomberg Television on Friday.

Here’s what else Wall Street is saying about the jobs report:

Eric Merlis, managing director and co-head of global markets at Citizens:

“It looks like we may be coming in for a soft landing after all. While geopolitical events could still throw a monkey wrench into things, today’s jobs numbers should ease concerns about the labor market. Today’s report should give the Fed more flexibility as it looks to continue lowering rates and it should help counter arguments that the Fed acted too late.”

Joe Gaffoglio, President and CEO at Mutual Of America Capital Management:

“The jobs report for September underscores an economy that is generally strong overall, as unemployment remains relatively low, while inflation moves towards the Federal Reserve’s 2% goal.”

Neil Birrell, chief investment officer at Premier Miton Investors:

“US employment data has been the focal point for bond and equity markets for the last two months and that will continue to be the case as everyone tries to second guess Fed policy. As it stands, a half-point cut must now be off the cards at their next meeting, although we do have one more jobs report before then – guess what we’ll all be looking at!”

Chris Larkin, managing director, trading and investing, E*Trade:

“Based on this data, not only is the jobs market not falling off a cliff, it doesn’t appear to be anywhere near the edge. There’s another jobs report due out before the Fed makes its next interest rate decision in early November, but this level of labor-market strength will make it more likely the Fed goes with a smaller cut.”

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