Scaled Back Hiring – US Market Wrap
– Stocks notched their biggest advance since February as a slowdown in US jobs sent bond yields sliding, with traders reviving bets on Federal Reserve rate cuts this year.
– Investors concerned about “stagflation” or a recession were reassured by a lower-than-expected payrolls statistic, which did not indicate that the labour market was ready to peak. Instead, the latest employment report provided ammunition to believers in an economy that is progressively slowing, allowing a data-dependent Fed to begin lowering policy as early as September.
– The S&P 500 rose 1.3%, with equities also buoyed by Apple postearnings surge. The Nasdaq 100 climbed 2%. The VIX sank to an over one-month low.
– Treasury two-year rates, which are more susceptible to upcoming Fed movements, fell seven basis points to 4.81%. Swap traders now expect approximately 50 basis points of policy easing this year, which equates to two rate drops. The dollar saw its worst week since March.
– This week’s slew of weaker-than-expected data figures, ranging from jobs to services and manufacturing, refocused attention on the “bad news is good news” concept. The US version of Citigroup’s Economic Surprise Index, which analyses the difference between actual releases and analyst forecasts, has reached its lowest level since February 2023.
– Nonfarm payrolls advanced 175,000 in April, the smallest gain in six months. The unemployment rate ticked up to 3.9% and wage gains slowed.
– Fed’s Goolsbee said that additional jobs reports like Friday’s would give him comfort the economy is not overheating. Speaking separately.
Fed’s Bowman said inflation will likely remain elevated for “some time,” but added she still anticipates price gains will eventually cool with rates held at current levels.
