Stocks rose, with traders weighing mixed jobs figures and awaiting next week’s inflation data for more clues on when the Federal Reserve would be able slow down its pace of rate hikes.
The S&P 500 halted a four-day slide. The dollar slumped the most since March 2020. Two-year US yields, which are more sensitive to imminent policy moves, reversed course and came down.
Fed fund futures are leaning toward pricing a 50-basis-point hike in December, with the peak around 5.1% next year. Officials this week raised rates by 75 basis points for the fourth straight time, lifting their benchmark to a target range of 3.75% to 4%.
Wall Street’s fear gauge is well below the panic levels seen during the pandemic or the 2008 crisis, but volatility is very much a feature of 2022.
The S&P 500 has already seen five monthly moves this year in excess of 7%, either to the upside or downside. Beyond the tumult of the 2008 global financial crisis, one must go back to 1933 — the days of the Great Depression — to see more swings of such magnitude in a single year.
“This week is a reminder that the intense volatility and emotional trading experience through much of the year is likely to continue,” said Mark Hackett, chief of investment research at Nationwide. “Bottoming processes are rarely clean, and even if bulls are gaining control, pockets of weakness are inevitable.”
Markets will watch the latest US inflation reading on Thursday after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.
Reaction to Jobs:
Chris Senyek at Wolfe Research:
“This report does nothing to change the Fed’s ‘higher for longer’ narrative. We probably won’t see really weak jobs numbers until the US economy is already in a relatively deep recession.”
Jason Pride at Glenmede:
“This jobs report likely does not push the Fed off its path for a 50-75 bp rate hike in December. However, the next big economic report that could move the needle for the Fed is next week’s CPI report.”
Peter Essele at Commonwealth Financial Network:
“If labor growth remains strong and earnings growth slows, it’ll be a win-win for investors since there will be less pressure on the Fed to raise rates. The result could be a soft landing in the economy as opposed to a hard one.”
Mike Loewengart at Morgan Stanley Global Investment Office:
“While the number may be disappointing for investors hoping for a dovish Fed sooner rather than later, keep in mind it was the lowest reading in nearly two years, so there could be signs that the market is slowing.”
Charlie Ripley at Allianz Investment Management:
“The most notable signal from today’s employment data is not that the data came in better than expected, but rather that some subtle signs of the economy slowing are starting to show up. Investors are looking for any signs that the Fed will pull back the reigns on policy tightening.”
Investors are fleeing to the safety of cash funds as the Fed remains firmly hawkish, according to strategists at Bank of America Corp.
The asset class had inflows of $62.1 billion in the week through Nov. 2, according to a note from the bank citing EPFR Global data. That’s contributed to $194 billion of inflows into cash from the start of October — the fastest start to a quarter since 2020.
In corporate news, US-listed Chinese stocks jumped amid fresh optimism over an easing of Covid restrictions. DoorDash Inc. reported revenue that beat estimates, a sign that customers are still ordering pricey takeout despite a squeeze from higher inflation.
Some of the main moves in markets:
- The S&P 500 rose 1.4% as of 4 p.m. New York time
- The Nasdaq 100 rose 1.6%
- The Dow Jones Industrial Average rose 1.3%
- The MSCI World index rose 1.9%
- The Bloomberg Dollar Spot Index fell 1.7%
- The euro rose 2.2% to $0.9960
- The British pound rose 1.9% to $1.1373
- The Japanese yen rose 1.1% to 146.70 per dollar
- Bitcoin rose 4.2% to $21,087.44
- Ether rose 6.8% to $1,645.86
- The yield on 10-year Treasuries advanced two basis points to 4.17%
- Germany’s 10-year yield advanced five basis points to 2.30%
- Britain’s 10-year yield advanced two basis points to 3.54%
- West Texas Intermediate crude rose 5.1% to $92.64 a barrel
- Gold futures rose 3.3% to $1,684.10 an ounce
- Gold futures rose 3.2% to $1,683.60 an ounce