The surprise surge in payrolls last month sent US stocks into a tailspin, putting the S&P 500 Index on track for a fifth straight weekly decline.
Already battered by worries that the Federal Reserve’s higher-for-longer mantra is forcing a repricing of assets across Wall Street, US stocks are now staring at the possibility of another rate hike this year as labor-market resilience persists.
The US economy added 336,000 jobs in September — the most since the start of the year — after sizable upward revisions to the prior two months, a Bureau of Labor Statistics report showed Friday. The unemployment rate held at 3.8%.
Futures on the S&P 500 sank almost 1% as of 8:35 a.m. in New York, while Treasury yields spiked across the curve.
Here was some of the reaction among Wall Street strategists and money managers:
Greg Bassuk, chief executive officer at AXS Investments:
“Investors turned bearish on stocks Friday morning following the release of the stronger than expected jobs report that catapulted yields higher on renewed Fed rate hike concerns. This week’s market has been reflective of the see-saw ride investors are on, with daily swings between bullish to bearish sparked by the uniquely mixed economic data reports. All eyes are laser-focused on next week’s CPI and PPI reports showing September’s inflation levels which will be a key driver of the Fed’s next rate hike decision.”
Candice Tse, global head of strategic advisory solutions at Goldman Sachs Asset Management:
“Today’s unexpectedly strong payrolls number shows that while US labor market softening has made incremental progress, the balance between supply and demand of workers will keep the Fed focused on managing inflation. This labor number, the last before the November Fed meeting, along with further disinflation will not only inform the Fed’s decision in November, but will also be an important input to its timeline for rate cuts in 2024.”
Robert Schein, chief investment officer at Blanke Schein Wealth Management:
“Friday’s jobs report suggests that the labor report remains very strong and cements the case for an additional Fed rate hike this year, and it also likely delays the pace of eventual rate cuts. The stock market is in the midst of a correction as it adjusts to rising bond yields, sticky inflation and the realization that even if the Fed stops raising interest rates, they are likely to keep them at this elevated level for quite some time.”
Bryce Doty, senior portfolio manager at Sit Investment Associates:
“Investors were looking for a job report that is weak enough to keep the Fed from raising rates while also not being so weak as to stoke fears of a hard landing. This report is clearly going to put a rate increase firmly back on the table. We have been in the camp that more supply of workers means less wage inflation and that trend continues with hourly earnings only rising 0.2%. But the Fed has things backwards and believes more job growth is inflationary.”
Seema Shah, chief global strategist at Principal Asset Management:
“The blow-out jobs report is maybe not so good news for markets. Not only does today’s report indicate the economy is almost too hot to handle and the Fed will need to respond with more rate hikes, it reinforces the higher for longer narrative that has been spooking bond markets for the past few weeks. Markets want the perfect landing and instead they are facing an upward sloping path.”
Michelle Cluver, portfolio strategist at Global X ETFs:
“Unfortunately for markets, this reading reflects there could be more the Fed needs to do to contain inflation pressures. Long dated yields continued their march higher as this reading reiterated the message of yields potentially needing to remain higher for longer. While encouraging for the resilience of the U.S. economy, this exceptionally strong reading is a challenge for markets.”
–With assistance from Elena Popina, Norah Mulinda and Matt Turner.
This article was provided by Bloomberg News.
