Stocks gain, Treasury yields jump after US job report
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[December 09, 2023] By
Chuck Mikolajczak
NEW YORK (Reuters) -A gauge of global stocks rose on Friday, on pace for
its sixth straight week of gains, while U.S. Treasury yields shot higher
after a strong U.S. jobs report forced markets to modify expectations
for the timing of rate cuts by the Federal Reserve.
U.S. job growth accelerated in November, with the Labor Department's
employment report showing nonfarm payrolls increased by 199,000 jobs
last month, above the 180,000 estimate of economists polled by Reuters,
after rising by an unrevised 150,000 in October. The unemployment rate
fell to 3.7% from the near two-year high of 3.9% in October.
Ahead of the payrolls report, a string of labor market data this week
indicated some softening in the jobs market, while other reports in
recent weeks showed a cooling of inflation and led markets to increase
expectations the Federal Reserve would have the leeway to cut interest
rates as soon as March.
Expectations for a March cut of at least 25 basis points (bps) slipped
to about 46%, according to CME's FedWatch Tool, down from about 65% on
Thursday.
"I don't think this gives the Fed the ability to pivot. It's not weak
enough," said Matthew Miskin, co-chief investment strategist at John
Hancock Investment Management in Boston.
"(Fed Chair Jerome) Powell's going to push back on the market's pricing
of rate cuts. He's likely to communicate that the Fed's got to stay
steady in restrictive territory for the time being."
Other data from the University of Michigan showed U.S. consumer
sentiment improved much more than expected in December, snapping four
straight months of declines, as households saw inflation pressures
easing.
On Wall Street, stocks closed higher after a choppy session with the S&P
500 closing at its highest level since March 2022, led by a 1.1% gain in
energy <.SPNY> shares as oil prices bounced. The Dow Jones Industrial
Average rose 130.49 points, or 0.36%, to 36,247.87, the S&P 500 gained
18.78 points, or 0.41%, to 4,604.37 and the gained 63.98 points, or
0.45%, to 14,403.97.
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An employee hiring sign with a QR code is seen in a window of a
business in Arlington, Virginia, U.S., April 7, 2023.
REUTERS/Elizabeth Frantz/File Photo
U.S. Treasury yields surged following the payrolls report. The yield
on the benchmark U.S. 10-year Treasury note jumped 10 basis points
to 4.23%, on track for its biggest one-day gain since Nov. 9. The
two-year U.S. Treasury yield, which typically moves in step with
interest rate expectations, shot up by 14.5 basis points, its
biggest daily jump since June 29, to 4.725%.
European shares closed at their highest since February 2022 with the
STOXX 600 index up 0.80%. MSCI's gauge of stocks across the globe
gained 0.29% and was poised for a sixth straight weekly gain, its
longest streak in four years.
Along with recent economic data, comments from Fed officials,
including Chair Jerome Powell, have fueled investor speculation
about the timing of the central bank's pivot to a rate cut. The
Fed's next policy meeting is on Dec. 12-13, while the next policy
announcement from the European Central Bank (ECB) is on Dec. 14.
Expectations have also grown the ECB was at or near the end of its
rate hike cycle and a cut may be on the horizon.
In currencies, the dollar index, which tracks the greenback against
a basket of six currencies, gained 0.29%, to 103.96 while the euro
was down 0.29% on the day at $1.0761.
Crude prices bounced after a recent slump but oil benchmarks were on
track for a seven-week decline, the longest in five years, after
Saudi Arabia and Russia lobbied OPEC+ members to join output cuts.
U.S. crude settled up 2.73% at $71.23 per barrel and Brent settled
at $75.84, up 2.42% on the day.
Gold fell 1.27% to $2,002.56 an ounce after dropping to $1,994.49,
its lowest since, Nov 24, as the dollar and yields climbed following
the payrolls report.
(Reporting by Chuck Mikolajczak, additional reporting by Sinéad
Carew; Editing by Nick Zieminski, Susan Fenton and Daniel Wallis)
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