Stocks Drop as Jobs Data Keep Traders on Edge: Markets Wrap

US stocks declined on Thursday, weighed down by strong labor-market data which is likely to keep the Federal Reserve firmly on its path of rate hikes.

(Bloomberg) — US stocks declined on Thursday, weighed down by strong labor-market data which is likely to keep the Federal Reserve firmly on its path of rate hikes. 

The S&P 500 slightly trimmed losses after St. Louis Fed President James Bullard said the central bank has almost raised rates as high as needed to tame inflation. But investors continued to focus on the robust jobs data that came in earlier in the session, as strength in the labor market remains a concern for the Fed. Government employment figures are due Friday.

The US 10-year Treasury yield hovered around 3.71%, after piercing 3.78% earlier. The dollar gained. 

The Fed has indicated that tight labor conditions give it room to keep at its battle against rising prices. At the same time, officials remain worried that financial conditions could get too loose to effectively crimp economic growth, even after the Fed embarked on the most aggressive tightening campaign in decades.

“What the Fed really wants to see is some slack build up in the labor markets, in hopes it can do this gently without creating much of a downturn” Raghuram Rajan, a former governor of India’s central bank, said on Bloomberg Television. “But it may well be that by the time it seems that it will have raised rates enough, that the momentum takes us down to a mild recession at the very least.”

Atlanta Fed President Raphael Bostic added to the subdued sentiment on Thursday after he said the central bank still has “much work to do” to tame inflation. He added to a chorus of hawkish Fed officials this week. Minneapolis Fed President Neel Kashkari said Wednesday he expects rates to rise as high as 5.4%, while Kansas City Fed’s Esther George said she favors a rise above 5%. 

Swap rates linked to individual Fed decisions jumped and now suggest a peak in the overnight effective rate of close to 5.05% in the middle of 2023. The current target range for the Fed is 4.25% to 4.5% and there are around 38 basis points of hikes priced in for the next gathering in February.

Read More: Treasury Yields Surge as Strong Jobs Data Bolster Fed Hike Bets

In company news, Amazon.com Inc. fell, after briefly rising on news that it is laying off more than 18,000 employees, the biggest reduction in its history. Bed Bath & Beyond Inc. sank after warning it might not be able to continue as a going concern. Silvergate Capital Corp. plunged after the bank said the crypto industry’s meltdown triggered a run on deposits. 

Key events this week:

  • Eurozone retail sales, CPI, consumer confidence, Friday
  • Germany factory orders, Friday
  • US nonfarm payrolls, factory orders, durable goods, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 0.9% as of 2:32 p.m. New York time
  • The Nasdaq 100 fell 1.1%
  • The Dow Jones Industrial Average fell 0.9%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.5%
  • The euro fell 0.7% to $1.0531
  • The British pound fell 1.1% to $1.1920
  • The Japanese yen fell 0.5% to 133.27 per dollar

Cryptocurrencies

  • Bitcoin was little changed at $16,829.51
  • Ether was little changed at $1,251.86

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 3.71%
  • Germany’s 10-year yield advanced four basis points to 2.32%
  • Britain’s 10-year yield advanced six basis points to 3.55%

Commodities

  • West Texas Intermediate crude rose 1.4% to $73.85 a barrel
  • Gold futures fell 1.1% to $1,839.20 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Isabelle Lee and Namitha Jagadeesh.

More stories like this are available on bloomberg.com

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