By Rita Nazareth
Stocks pared losses as traders assessed a mixed U.S. jobs report against prospects for Federal Reserve policy. Bonds retreated.
The S&P 500 traded off session lows, while still heading toward its fifth straight week of declines — the longest losing streak since June 2011. Treasury 10-year yields topped 3%, while the dollar wavered.
Nonfarm payrolls climbed 428,000 in April, yet a smaller labor force may put pressure on employers to boost wages to bring workers back. That dynamic may complicate the central bank’s fight to tame inflation as officials try to bring labor demand in line with supply. The participation rate — the share of the population that’s working or looking for work — sank. While average hourly earnings fell short of estimates on a monthly basis, they were up 5.5% from a year earlier.
- A further drop in the participation rate “could exacerbate the labor supply shortage, resulting in further wage pressures that will inevitably flow through to broad-based inflation,” said Peter Essele, head of portfolio management at Commonwealth Financial Network. “The Fed will surely speed up the pace of tightening if the participation rate continues to decline amid a robust hiring backdrop.”
- “Markets will likely be most focused on labor supply and any prospects for cooling wage growth,” said Seema Shah, chief strategist at Principal Global Investors. “Today’s report doesn’t give much away. For the Fed, there is nothing in today’s report to suggest they can take their foot off the brake.”
- “The story here is the participation rate. It didn’t rise, it fell, which is counter to what the Fed is looking for in order to get the demand of labor up,” said Steve Chiavarone, portfolio manager and head of multi-asset solutions at Federated Hermes. “In addition, wage inflation remains elevated.”
- “No big surprises from today’s jobs report — it largely confirms that the labor market remains tight, affording the Fed the flexibility to tackle its price stability mandate head-on,” Jason Pride, chief investment officer of private wealth at Glenmede.
- “The Fed likely won’t be swayed from its rate hike campaign,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley. “Since numbers came in mostly in line with expectations, the market may have already priced in a robust jobs read.”
The global market selloff that saw the S&P 500 post its worst first four months of a year since 1939 has further to run, according to Bank of America Corp. strategists led by Michael Hartnett. “Base case remains equity lows, yield highs yet to be reached,” they wrote in a note to clients.
Some of the main moves in markets:
- The S&P 500 fell 0.5% as of 10:48 a.m. New York time
- The Nasdaq 100 fell 0.4%
- The Dow Jones Industrial Average fell 0.5%
- The Stoxx Europe 600 fell 1.9%
- The MSCI World index fell 1%
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0563
- The British pound fell 0.2% to $1.2335
- The Japanese yen fell 0.2% to 130.51 per dollar
- The yield on 10-year Treasuries advanced six basis points to 3.10%
- Germany’s 10-year yield advanced nine basis points to 1.14%
- Britain’s 10-year yield advanced three basis points to 1.99%
- West Texas Intermediate crude rose 1.9% to $110.31 a barrel
- Gold futures rose 0.5% to $1,884.70 an ounce
More stories like this are available on bloomberg.com.