On a morning when Wall Street was already anxious about the health of US regional banks, a mixed jobs report eased investor concerns that the Federal Reserve would have to do a 50 basis point hike at its meeting later this month.
(Bloomberg) — On a morning when Wall Street was already anxious about the health of US regional banks, a mixed jobs report eased investor concerns that the Federal Reserve would have to do a 50 basis point hike at its meeting later this month.
Treasuries, which were surging even before February report, pushed higher. S&P 500 futures gained as much as 0.6% then headed back into the red. Swap rates showed that investors now expect a Fed rate cut by the end of the year.
“This is a good report, all things equal,” Dennis DeBusschere, founder of 22V Research, said of the jobs data. “Bottom line: The Fed has been clear that labor market tightness is the issue and today’s report pushed back against that a bit. It does not argue for 50bp. Now back to SVB.”
Traders were closely following news on SVB Financial Group, which sank as much as 69% in premarket trading Friday. After the Santa Clara, California-based bank had to bolster its capital position, venture capitalists including Peter Thiel’s Founders Fund urged portfolio businesses to limit their exposure to the firm.
“Really think concern for potential contagion risk in banks/financial services is big news this a.m.,” David Petrosinelli, senior trader at InspereX, wrote in a message.
Here’s what others on Wall Street were saying:
Jay Hatfield, chief executive officer of Infrastructure Capital Advisors:
“The job report was mildly bullish as despite jobs being above expectations offset by a below expectations wage increase of 0.2% vs. expectations of 0.3% and an increase in the unemployment rate.
“This report validates our view that an incompetent Fed is way too focused on the labor market and driving unemployment rate up to curb inflation instead of focusing on the housing sector and energy/commodity prices,” he said. “Consequently, the Fed is in the process of another major policy error by raising the Fed funds rate way too high without pausing to assess the impacts of the record increases over the last year. The policy error is already leading to bank runs.”
Zhiwei Ren, portfolio manager at Penn Mutual Asset Management:
“This jobs report was supposed to be very important, but with recent volatilities in SVB and the banking sector, the importance came down a little. The headline number — 311k — is better than expected, but average hourly earnings growth is lower, the unemployment rate ticked up to 3.6%. So overall pretty balanced. It paints a picture of a robust labor market, with less wage pressure.”
Neil Dutta of Renaissance Macro Research:
“I can see why the soft-landing bulls are running with today’s report, especially given the set up going in, but let’s state the obvious, the Fed’s work is not done. Terminal rates are still going up.”
‘Oh, and it is time to hit the mute button on people talking about weather, imminent recession, and calling the no-landing story a hoax.”
Paul de la Baume, a market strategist at FlowBank SA.:
The February report “alleviates the worst fears of a boiling hot jobs report as we had last month.”
Kim Forrest, chief investment officer at Bokeh Capital Partners:
“The unemployment rate — which is easier to understand and easier to calculate than the number of jobs created — is what the markets are focusing on right now, and that’s showing up in the bond market with a drop in yields across the curve.”
Randall Kroszner, University of Chicago economics professor and former Federal Reserve board member, speaking to Bloomberg TV:
“It’s hard to interpret any one report in too much detail and really say, ‘Ah, well, the Fed’s going to change because of it.’ I think looking over the last three months, we still see a very strong labor market.” “The labor market is still pretty strong. It doesn’t seem to be strengthening. But if it were, then I think it would be very clear it would have to be 50. Now, I think it’s reasonable that the market states an even bet.”
Gareth Ryan, managing director at IUR Capital:
“Today’s jobs report is part one of a two-part show, with the CPI report on Tuesday. The Fed will closely monitor both reports and we would still put more weight on inflation print relative to today’s jobs data. 50bps still appears on the cards, but that could change on Tuesday.”
Alexandre Baradez, chief market analyst at IG in Paris:
“My feeling is that we are still waiting for the knock-out report which gives a clear-cut picture and introduces a pivot. So we’re in a difficult situation for markets as we have no pivot and we are still in a transition phase. That said I don’t see a rate accident coming from the Fed at the moment, particularly not with what’s going in the banking sector.”
–With assistance from Julien Ponthus and Sagarika Jaisinghani.
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