Wall Street was down from the start on Friday, but an hour into the trading day, shoulders had slumped and things were looking brighter for the three major indexes. says the analyst team at ABN Amro Bloomberg The truth is that the United States is experiencing a “moderate scenario” in light of the continued tightening of the labor market and the slowdown in inflation – which gives investors hope for a smooth landing.
This is how it looked at the end of the trading day at 22:00 Norwegian time:
- The Nasdaq technology index rose 1.6 percent
- The Dow Jones Industrial Average rose 0.8 percent
- The broad Standard & Poor’s index rose 1.1 percent
As the stock market opened, there was interest rate fear among investors as they heard the new employment numbers. An hour before the start of trading, the numbers that market participants had been waiting for all week, the “nonfarm payrolls,” or the number of new jobs created in the United States outside the agricultural sector, came out.
The summary shows that 336,000 nonfarm jobs were created in the United States in September. The market consensus was ahead of 170,000, according to Trading Economics. For August, the original figure of 187,000 new jobs was revised to 227,000.
– Everyone hits off the field
The release of these numbers is closely followed by global financial markets and is considered an important measure of the temperature of the American economy. Chief economist Marius Gunsholt Hof at Handelsbanken says raising interest rates has become more important again.
Chief Economist Marius Gunsholt Hof at Handelsbanken. (Photo: Vartin Rudjord)
– This is the number that amazes everyone, says Hof.
He says today’s employment numbers as well as hawkish comments from several Fed representatives recently are helping to increase the likelihood of another rate hike. The interest rate market has increased the likelihood of a rate hike by the Fed at its November meeting and at its December meeting.
At the time of writing, there was a 32% chance that the key interest rate would be raised at the Fed’s November meeting.
– Although the entire interest rate is at a level that should be very restrictive, today’s numbers are another confirmation that the interest rate is not high enough, says Hof.
Interest rates are pants
Interest rates on two- and 10-year government bonds in the United States posted immediate declines in the wake of strong jobs numbers.
This shows that the US economy is still in good shape, and is only exacerbated by rising long-term interest rates. “They have further to go, which is what these numbers contribute to,” says Dane Sikhoff of Nordea Markets.
The ten-year interest rate jumped to about 4.83 percent, while the two-year interest rate rose to about 5.14 percent. The dollar also immediately strengthened against the euro.
– Now expectations have changed, and this affects the market for long-term interest rates. “I think this will continue for a while, but I would be very surprised if this narrative about the need to raise interest rates exists in half a year or a year,” Sikoff says.
The trend is down for US stocks
US stock market futures indices saw a noticeable decline shortly after the numbers were published, roughly an hour before the stock market opened. The S&P 500, Nasdaq Composite, and Dow Jones are all expected to see big declines on Friday.
Given the recent sharp rise in long-term interest rates, the discount rate for future earnings – and the valuation of stocks – must change. Sikov says that if this rise continues, a correction in the stock market should not be ruled out.
Strong rise in government interest rates
The US labor market has long defied the aggressive interest rate hikes initiated by the Federal Reserve over the past year or so, and non-farm payrolls reports have been steadily beating expectations.
Recently, long-term government interest rates have risen sharply, partly because the market generally recognizes that the U.S. economy can tolerate and needs higher interest rates for a longer period of time, according to Ingvild Borgen, an economist at DNB Markets.
In the period before the figures were published, the interest rate on ten-year US government bonds rose a few basis points to about 4.74 percent. Earlier in the week, the rate of “ten-year-old” inhalation rose by 4.9 percent.
It is uncertain whether the Fed will raise interest rates again this year, but they will likely be satisfied with long-term interest rates being significantly higher. Sickoff says long-term interest rates are more important to the economy than short-term interest rates, given the large proportion of long-term interest rates held by US households.
He adds that this represents a challenge for Norges Bank because it raises the dollar exchange rate.
The release also contains an overview of unemployment and wage growth in the United States. Wage growth was expected to be 3.7 percent, down from 3.8 percent in August, while hourly wage growth was expected to be 0.3 percent month-on-month, up from 0.2 percent in August.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. No copying or other use of all or part of the Content may be permitted except with written permission or as permitted by law. For more terms see here.
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