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Wall Street slides on employment data

Rising wages can lead to what economists call a “wage-price spiral”, as companies raise the prices of their products to maintain profits.

Indeed, some market watchers have pointed to figures from Friday’s jobs report, suggesting that the job market may not be as strong as the overall numbers suggest. For example, the number of people with multiple jobs has increased by more than 500,000, according to Brian Jacobsen, senior investment strategist at Allspring Global Investments.

“It was mostly from people who already had a full-time job and their second job was part-time,” he said. is superficially impressive.”

Wall Street’s most obvious move came from the bond market, where US Treasury yields surged shortly after the release of the jobs report. Two-year Treasury yields, which tend to track expectations for action by the US Federal Reserve (Fed), jumped to 3.23% from 3.05% late Thursday. The 10-year yield, which affects mortgage rates, rose from 2.69% to 2.84%.

Wall Street is about to have its best month for stocks since late 2020. Wall Street’s hope was that the economy slowed enough for the Fed to ease its rate hikes.

Rising mortgage rates hit the housing industry, especially after the Fed raised short-term rates four times this year. The last two rate hikes have tripled his normal rate, and the Fed has lifted the overnight rate benchmark from near zero to 2.25 percentage points.

“Today’s share price is well above expectations, complicating our task,” said Rick Reader, BlackRock’s chief investment officer for global fixed income, in a statement. He said that unless next week’s highly anticipated report on inflation shows “dramatic weakness, which is highly unlikely at this point,” the Fed will report short-term growth next month. He said the assumption would be a further 0.75 percentage point hike in interest rates.

Traders scrambled to bet on a bigger rate hike due at the Fed’s next meeting. They reversed their predictions from the previous day and generally expect the Fed to raise rates by 0.75 points instead of 0.75 points.

Such a rise will hurt investment prices in the short term and deliberately slow the economy, further increasing the risk of a recession.

Such expectations also mean that 2-year Treasury yields are above 10-year yields. This is an anomaly, and some investors see it as a sign that a recession will hit the economy within the next year or two.

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On Friday, Warner Bros. Discovery fell 16.5% as the biggest loss in the S&P 500 after reporting weaker results in recent quarters than analysts expected. Monster Beverage lost 5.2% after reporting weaker-than-expected gains despite stronger-than-expected earnings.

Stocks of smaller companies also weathered turbulent trading and surged higher. The Russell 2000 Index rose 15.37 points (0.8%) to close at 1921.82.

In overseas stock markets, India’s Sensex rose 0.2% after the Reserve Bank of India raised its base rate by 0.5 percentage points to 5.4%.

Japan’s Nikkei 225 rose 0.9% while Germany’s DAX fell 0.6%.

Wall Street slides on employment data

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