US stocks are on track for a weekly loss after a spate of jobs reports tamped down speculation the Federal Reserve would leave interest rates unchanged later this month.
(Bloomberg) — US stocks are on track for a weekly loss after a spate of jobs reports tamped down speculation the Federal Reserve would leave interest rates unchanged later this month.
This year’s frenzy for artificial intelligence-linked stocks took a breather with the S&P 500 and Nasdaq 100 poised to end the first week of July lower. Friday data showed a still-resilient labor market, but one that was less robust than implied by Thursday’s private payrolls report.
Among notable movers, Levi Strauss & Co. fell sharply after lowering its outlook for the year while electric-vehicle manufacturer Rivian Automotive Inc. climbed for the eighth-straight session. Yield on the two-year Treasury slumped to 4.92%.
“Markets are starting to take the Fed at its word now in terms of two more rate hikes coming this year, and with a more sincere respect for the Fed’s commentary that easing these higher interest rates lower will not come for many months after that,” Rick Rieder, chief investment officer of global fixed income at BlackRock, told Bloomberg Television.
Traders parsed June’s less-than-expected increase and downward revisions to nonfarm payrolls against surprisingly strong private hiring data earlier in the week while commentary from Chicago Fed President Austan Goolsbee left the door open for more data to sway officials.
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Friday’s payroll numbers are not yet weak enough, according to Seema Shah, chief global strategist at Principal Asset Management.
“Jobs growth has slowed but remains too strong to justify an extended Fed pause,” she said. “More significantly, with average hourly earnings surprising to the upside, wage pressures are still too strong. Today’s report will give the Fed little reason to hold off from hiking at the July meeting.”
June’s 0.4% wage growth indicates businesses are still desperate to draw in and keep workers, according to Jeffrey Roach, chief economist at LPL Financial.
“The latest jobs report all but ensures the Fed will increase rates later this month,” he wrote.
A gauge of the dollar tumbled while gold advanced.
Stocks have been losing ground in July after a strong first half of the year as hawkishness from central banks from the US to the UK dampens hopes of a soft landing for the global economy. Technology shares have been one of the hottest trades, driven by the buzz around AI, but Bank of America Corp. strategists said investors who piled into the sector risk being caught off-guard in the selloff sparked by rate hikes.
“We say ‘sell the last hike’ will hit tech hardest,” the BofA team led by Michael Hartnett wrote in a note. But if excitement over AI continues, they said the “baby bubble” that currently exists in a handful of Big Tech shares will mature into a larger one in the second half.
Swap contracts linked to the Federal Reserve’s future policy decisions price in a quarter-point interest-rate hike by July 26 and show a growing likelihood of an additional move by year-end. This expectation for higher rates is reinforcing bets on tighter monetary policy globally as central banks struggle to rein in inflation.
Dallas Fed President Lorie Logan voiced her concerns on Thursday that inflation was still running too hot and more tightening was needed. Policymakers elsewhere share that view, with European Central Bank President Christine Lagarde saying there is still “work to do” to bring inflation under control.
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Key Events This Week:
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
- The S&P 500 rose 0.3% as of 12:26 p.m. New York time
- The Nasdaq 100 rose 0.4%
- The Dow Jones Industrial Average was little changed
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.7%
- The euro rose 0.7% to $1.0966
- The British pound rose 0.8% to $1.2836
- The Japanese yen rose 1.3% to 142.17 per dollar
Cryptocurrencies
- Bitcoin was little changed at $30,341.18
- Ether fell 0.7% to $1,870.8
Bonds
- The yield on 10-year Treasuries was little changed at 4.03%
- Germany’s 10-year yield advanced one basis point to 2.64%
- Britain’s 10-year yield declined one basis point to 4.65%
Commodities
- West Texas Intermediate crude rose 1.7% to $73.01 a barrel
- Gold futures rose 1% to $1,934.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Viljoen, Tassia Sipahutar and Macarena Muñoz.
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