Policy-sensitive Treasury notes fell, sending two-year yields back above 4%, as a solid hiring report bolstered bets for another Federal Reserve rate increase. US stock futures advanced before closing early as the report eased concerns the economy was headed for recession.
(Bloomberg) — Policy-sensitive Treasury notes fell, sending two-year yields back above 4%, as a solid hiring report bolstered bets for another Federal Reserve rate increase. US stock futures advanced before closing early as the report eased concerns the economy was headed for recession.
Contracts on the S&P 500 climbed, while the two-year yield jumped 15 basis points to 4.02% after March’s hiring report showed resiliency in the labor market that could enable the Fed to make policy more restrictive. Payroll additions topped 200,000, wage-growth slowed and the unemployment rate dropped.
“This payrolls info is still indicating that the job market is on solid ground, but the magnitude of the payrolls gain relative to expectations is not significant enough for the Fed to dramatically shift course,” George Cipolloni, portfolio manager at Penn Mutual Asset Management, said. “Wage growth was as expected. I do not see much here that should make the Fed move off of their current path.”
The cash equity markets are closed in the US for the Good Friday holiday, and futures stopped trading at 9:15 a.m. in New York. Treasuries opened for a shortened session, with the recommended close at noon. European markets were mostly shuttered.
Swaps trading showed the odds for a quarter percentage point interest-rate increase at the Fed’s May meeting rose to about two in three, up from roughly 50-50 before the data landed. Investors have been aggressively pricing in rate cuts later this year as economic data falls short of estimates, suggesting the American economy is slowing.
Data Thursday indicated filings for jobless claims rose more than expected, a day after a private reading on hiring came in below estimates. Job openings also contracted more than forecast, adding to worries that the labor market was softening.
The next major data point for the Fed is a report on consumer prices, due April 12. Officials deliver their policy move on May 3.
“While this is an employment report not likely to cause alarm, there is still no evidence policy is tight enough to slow demand in a meaningful way, either,” Chris Low, chief economist at FHN Financial wrote in an email. “There are other things going on in the world, of course, including credit tightening in the aftermath of recent bank failures. It will all go into the mix.”
The two-year Treasury yield peaked above 5% just before last month’s banking stress and then plunged as worries mounted that tighter lending will constrict growth at the same time the Fed’s aggressive tightening filters through to the real economy.
Read: Bond Action Gets Crazy on Payroll Good Friday, Stocks Less So
The S&P 500 concluded its first losing week in the past four as data Thursday showed filings for jobless claims surpassed estimates last week, a day after a private payrolls report indicated hiring slowed more than forecast.
US stocks bounced back from early losses on Thursday after St. Louis Fed President James Bullard said he didn’t think tighter credit conditions stemming from the recent banking turmoil would tip the economy into recession. Meanwhile, the International Monetary Fund warned that its outlook for global economic growth over the next five years is the weakest in more than three decades, urging nations to avoid economic fragmentation caused by geopolitical tension and take steps to bolster productivity.
The yen fluctuated after declining Thursday against the dollar for the first time this week. While much of Asia including Australia, Hong Kong and Singapore was closed for holidays, financial markets in Japan and mainland China were open. Japan’s benchmark Topix edged higher, ending a two-day slump, and shares in China and South Korea advanced.
Money Markets
The cash pile parked at money-market funds hit a fresh record high in the past week, although inflows slowed from the recent breakneck pace. About $49.1 billion poured into US money-market funds in the week to April 5, bringing total assets to an unprecedented $5.25 trillion, according to data from the Investment Company Institute.
Money-market funds have been scooping up cash recently. Initially much of that flow was driven by more attractive rates, but concern about the steadiness of some smaller lenders helped turbocharge that within the past month.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2% as of 9:15 a.m. in New York
- Nasdaq 100 futures advanced 0.1%.
- The Topix gained 0.3%, while the Nikkei 225 added 0.2%
- The Shanghai Composite Index added 0.3% and the CSI 300 gained 0.6%
Bonds
- The two-year Treasury yield rose 15 basis points to 4.02%
- The 10-year rate added nine basis points to 3.39%
Currencies
- The euro was slipped to $1.09
- The yen was little changed at 131.70 per dollar
Cryptocurrencies
- Bitcoin was little changed at $27,996
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Phil Serafino and Stephen Kirkland.
(A previous version corrected to say stocks bounced back on Thursday in sixth paragraph.)
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