US stocks slipped as traders fret whether or not the labor market remains too hot for the Federal Reserve to forestall another interest rate increase next month.
(Bloomberg) — US stocks slipped as traders fret whether or not the labor market remains too hot for the Federal Reserve to forestall another interest rate increase next month.
The S&P 500 and the tech-heavy Nasdaq 100 slumped after the latest readout showed weekly unemployment claims holding near historical lows. The benchmarks were stuck in narrow ranges as stocks traders hesitated to make big bets ahead of Friday’s key monthly non-farm payrolls report which could help inform the central bank’s next policy move.
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Treasuries were mixed with yields on the 10-year hovering around 4.7%. Oil extended a retreat, with WTI crude reaching below $83 per barrel for the first time since late-August. The dollar was little changed.
Thursday’s report which sets the stage for payrolls data, showed a slight rise in the number of people filing for unemployment benefits compared with the previous week. Claims ticked up to 207,000 in the week ending Sept. 30, according to Labor Department data.
The market has been getting conflicting signals this week after an unexpected rise in August job openings spurred a rout in Treasuries, sending bond yields soaring to multi-year highs. The selloff paused after private payrolls data showed US companies added the fewest number of jobs since the start of 2021 last month.
While markets have stabilized from the recent rout, investor sentiment remains fragile. Investors are keen to see if Friday’s labor data cements bets on a November pause or hike from the Federal Reserve. Currently, swaps are pricing a one-in-four chance of a Fed move higher next month.
“Friday’s payrolls data, and next week’s inflation number will decide whether the 10-year Treasury yield goes up to 5% or down to 4.5%,” Societe Generale strategist Kenneth Broux said. A higher-than-forecast jobs number could trigger “another wave of dollar-buying and bond-selling,” he added.
In the monthly employment report, economists surveyed by Bloomberg predict the US economy added 170,000 workers in September, slightly less than the previous month.
Even with markets showing signs of calm, strategists’ reports highlight deep concern about the long-term economic toll of higher-for-longer interest rates. Barclays Plc analysts wrote in a note that global bonds are doomed to keep falling unless a sustained slump in equities revives the appeal of fixed-income assets.
“There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,” analysts led by Ajay Rajadhyaksha said. “In the short term, we can think of one scenario where bonds rally materially. If risk assets fall sharply in the coming weeks.”
Key events this week:
- China has week-long holiday
- San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
- Germany factory orders, Friday
- US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.7% as of 11:46 a.m. New York time
- The Nasdaq 100 fell 1%
- The Dow Jones Industrial Average fell 0.5%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0530
- The British pound rose 0.3% to $1.2168
- The Japanese yen rose 0.4% to 148.51 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $27,610.33
- Ether fell 1.2% to $1,621.94
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.72%
- Germany’s 10-year yield declined three basis points to 2.88%
- Britain’s 10-year yield declined three basis points to 4.55%
Commodities
- West Texas Intermediate crude fell 1.8% to $82.67 a barrel
- Gold futures fell 0.2% to $1,830.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Chiranjivi Chakraborty and Richard Henderson.
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