Saturday, December 3, 2022

Markets fall after stronger than expected jobs report

Dow lost 200, decliners over advancers 2-1 & NAZ declined 134.  The MLP index was steady at 228 & the REIT index fell 2+ to the 388s.  Junk bond funds slid lower & Treasuries were sold after yesterday's rally in yields (more below).  Oil inched higher in the 81s & gold gave back 36 after yesterday's rally.

AMJ (Alerian MLP index tracking fund)

 

 

 




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US job growth rose faster than expected in Nov as the labor market remained resilient in the face of higher interest rates, scorching-hot inflation & mounting recession fears.  Employers added 263K jobs in Nov, the Labor Dept reported in its monthly payroll report, topping the 200K jobs forecast.  It marks a slight deceleration from the upwardly revised job gain of 284K recorded in Oct.  The unemployment rate, meanwhile, held steady at 3.7%.  The report will likely do little to sway the Federal Reserve in its fight against inflation, which has already seen policymakers raise interest rates at the most aggressive pace since the 1980s in a bid to crush out-of-control consumer prices & cool the labor market.  In another concerning sign that could further complicate the Fed's job, average hourly earnings surged 0.6% in Nov, double what was anticipated.  Wages are 5.1% on an annual basis, far higher than the 4.6% estimate.  Job gains were broad-based in Nov, with leisure & hospitality leading the way in hiring, adding 88K new workers.  T hat was followed by health care (45K), gov (42K) & social assistance (23K).  However, some sectors saw payrolls shrink last month: Department stores shed 22K workers, & transportation & warehousing cut positions by 15K.  While monthly jobs data is always important, the Fed is closely watching this particular report for signs the labor market is starting to slow down from its frenzied pace as policymakers try to wrestle inflation, which is still running near a 40-year high, back to 2%.

US economy adds 263K jobs in November, as hiring remains solid

The Senate passed a bill to avoid a railroad strike, while rejecting separate measures to give rail workers extra sick leave days & to extend a cooling-off period between management & labor for 60 days.  The bill to avoid the strike passed 80 to 15 with bipartisan support & avoids a catastrophic blow to the US economy ahead of the holidays.  It will now head to Pres Biden for his final signature.  "I am very glad that the two sides got together to avoid a shutdown which would have been devastating for the American people, for the American economy, and many workers across the country." Senate Majority Leader Chuck Schumer said ahead of the votes.  Schumer announced the votes after negotiations between Reps & Demts on how to handle 2 bills the House passed on preventing the strike & giving workers 7 extra sick days.  The final agreement the Senate passed was already approved by 8 transportation unions earlier this year.  It would grant workers 3 unpaid sick days as long as the employers were provided with at least 30 days' notice before the time was taken.  4 transportation unions, compromising nearly 100K rail workers, say the deal is unfair & threatened a national strike unless the agreement is broadened.  They are asking for 7 additional days of paid sick leave — a demand the House moved to grant yesterday.

Senate passes rail strike deal that would've cost billions each day

Treasury yields popped as Nov jobs report showed the US economy added more jobs than expected.  The yield on the 10-year Treasury jumped 8 basis points to 3.64%.  Yesterday, it fell by as many as 19 basis points.  The 2-year Treasury yield soared 14 basis points to 4.41%.  Yields & prices move in opposite directions & one basis point is equivalent to 0.01%.  The central bank has been trying to control inflation thru interest rate hikes & has raised rates by 75 basis points at each of its last 4 meetings.  Fed officials have been indicating that the pace of rate hikes could slow down soon, & markets are now expecting the central bank to implement a 50 basis point rate hike at its Dec meeting.  

Treasury yields jump after stronger-than-expected jobs report

The jobs report coming in better than expected worries investors, since it signals the FED has more work to do in its fight to control high inflation.

Dow Jones Industrials

 






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