Stocks came off session lows, with traders not very keen on making big moves ahead of the all-important US jobs report as they digested remarks from Federal Reserve officials who sounded unequivocally committed to their goal of crushing inflation with rate hikes.
(Bloomberg) — Stocks came off session lows, with traders not very keen on making big moves ahead of the all-important US jobs report as they digested remarks from Federal Reserve officials who sounded unequivocally committed to their goal of crushing inflation with rate hikes.
The S&P 500 trimmed most of a slide that approached 1% amid gains in energy and tech shares. Treasury 10-year yields moved away from Thursday’s highs while still remaining close to 3.8%. The dollar rose.
So far, the labor market has remained robust even after the Fed began to aggressively increase interest rates and economic activity slowed. Friday’s monthly jobs report is expected to show that employers added 250,000 payrolls last month, based on the median estimate from economists. The unemployment rate is seen holding at 3.7%, which is just above a five-decade low.
The US central bank has not finished the task of bringing inflation down and is “quite a ways away” from pausing its campaign of interest-rate increases, Minneapolis Fed President Neel Kashkari said. His Cleveland counterpart Loretta Mester noted the US is in an unacceptably high inflation environment.
“There’s going to still be a lot of volatility to this market,” said Rich Steinberg, chief market strategist at The Colony Group. “I don’t think the Fed is going to be ready to pivot so quickly. We’re going to be in this kind of tug of war between good news, bad news.”
Read: Yellen Flags Need to Mind ‘Global Repercussions’ of Tightening
Investors counting on a Fed pivot any time soon are bound to get burned again, according to PGIM Fixed Income.
“We’ve seen this movie time and time again,” said Greg Peters, co-chief investment officer at the Newark-based firm, in an interview. “The market gets hyped up on different narratives between inflation releases. I’ve been surprised by it, and we’ve been using it as an opportunity to sell into.”
With the economy likely to slow down next year, tech stocks and US equities are looking more attractive, according to Citigroup Inc. strategists led by Robert Buckland. They expect 18% returns for global stocks by the end of 2023 but warn “it will likely be a volatile ride.”
Mortgage rates in the US fell, shifting direction after a six-week streak of gains that sent borrowing costs to a 15-year high. Even with the latest decline, mortgage costs have more than doubled since starting the year around 3% — a steep climb that has slammed the brakes on the pandemic housing rally, highlighting one of the Fed’s goals in its effort to cool inflation.
Key events this week:
- US unemployment, wholesale inventories, nonfarm payrolls, Friday
- BOE Deputy Governor Dave Ramsden speaks at event, Friday
- Fed’s John Williams speaks at event, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2% as of 11:52 a.m. New York time
- The Nasdaq 100 rose 0.1%
- The Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.6%
- The euro fell 0.6% to $0.9820
- The British pound fell 1.3% to $1.1181
- The Japanese yen fell 0.2% to 144.86 per dollar
Cryptocurrencies
- Bitcoin rose 0.5% to $20,096.48
- Ether rose 1.7% to $1,367.77
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.81%
- Germany’s 10-year yield advanced six basis points to 2.09%
- Britain’s 10-year yield advanced 14 basis points to 4.17%
Commodities
- West Texas Intermediate crude rose 0.6% to $88.28 a barrel
- Gold futures were little changed
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