February 8, 2023

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US stocks slide after jobs data bolster expectations of Fed tightening

2 min read

US stocks dropped after the latest batch of data on the labour market showed hiring continued at a robust pace last month, reinforcing expectations for aggressive tightening in monetary policy from the Federal Reserve.

The blue-chip S&P 500 index fell more than 1 per cent when markets opened in New York, with the tech-heavy Nasdaq Composite index off as much as 1.9 per cent.

The report from the labour department showed the world’s biggest economy added 390,000 jobs last month, modestly below the 436,000 in April. However, the May figures still exceeded expectations for 325,000.

Investors are keeping a keen eye on the state of the jobs market as they assess how quickly they expect the Fed to raise interest rates. Policymakers have already lifted the central bank’s main rate by 0.75 percentage points this year and are expected to follow up with further aggressive tightening of monetary policy as they attempt to tamp down inflation. While the Fed seeks to foster maximum employment, an excessively hot jobs market can add to inflationary pressures.

Peter Boockvar, chief investment officer at Bleakley Advisory Group, noted that while the numbers were not a “blowout” performance, they still reinforce expectations for an “aggressive Fed response.”

US government debt came under some selling pressure following the jobs report, with the yield on the monetary policy sensitive two-year Treasury note rising 0.05 percentage points to 2.68 per cent. The 10-year yield, which more closely tracks the longer term economic outlook, rose 0.05 percentage points to 2.96 per cent.

Both of these benchmark bond yields have jumped since the start of the year but have receded from their recent highs.

In equities, shares in Tesla fell about 5 per cent at the open after Reuters reported that Elon Musk told employees he had a “super bad feeling” about the economy and that the automaker may need to cut about 10 per cent of its workforce.

Meanwhile, the regional Stoxx Europe…

2022-06-03 09:56:05

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