Markets tumble after a disappointing jobs report

Dow dropped 271, decliners over advancers 5-2 & NAZ declined 378.  The MLP index was down about 1 to 281 & the REIT index was off 2+ to the 424s.  Junk bond funds were little changed & Treasuries saw more buying which reduced yields (see below).  Oil was off 1+, falling to the high 67s, & gold pulled back 7 to 2536.

Dow Jones Industrials

US job growth picked up in Aug but missed expectations, while the unemployment rate was little changed.  The Dept of Labor reported that employers added 142K jobs in Aug, compared to the 160K gain that was projected.  The unemployment rate also dipped slightly to 4.2%, in line with expectations, after it had unexpectedly risen to 4.3% in Jul, which was the highest level for the jobless rate since Oct 2021.  The number of jobs added in the prior 2 months were both revised downward, with job creation in Jun revised down by 61K from a gain of 179K to 118K, while Jul was revised down by 25K from 114K to 89K.  With the revision, Jul's job creation was the lowest nonfarm payrolls reading since Dec 2020.  Private sector payrolls missed expectations with 118K jobs added against a prediction of 139K.  Manufacturing payrolls declined by 24K in Aug, below estimates that expected the sector's employment level to remain flat.  The labor force participation rate remained at 62.7% in Aug & has been little changed over the course of the year.  The long-term unemployment picture was virtually unchanged in Aug, with the number of people who have been jobless for 27 weeks coming in at 1.5M.  The long-term unemployed account for 21.3% of all unemployed people.  The construction sector saw employment rise by 34K, above the average monthly gain of 19K over the last 12 months.  Health care employment increased by 31K jobs, below the 12-month average of 60K.  Average hourly earnings for all employees on private nonfarm payrolls rose by 14¢ (0.4%) to $35.21, which brings gains over the past 12 months to 3.8% thru Aug.

US economy added 142,000 jobs in August, below economists' expectations

The 10-year Treasury yield was little changed as investors digested an Aug jobs report that showed an easing labor market, as concerns about an economic slowdown have been growing.  The yield on the 10-year Treasury was less than 1 basis point lower at 3.732% & the 2-year Treasury yield was last more than 4 basis points lower at 3.714%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Data yesterday showed that private payrolls grew by 99K in Aug, far lower than the 140K estimate.  The figures renewed concerns about an economic downturn & a softening labor market, which were first prompted by Jul's weaker-than-expected jobs report.  Weekly initial jobless claims meanwhile fell from the previous week, figures showed.  Investors will be looking closely at economic data releases until then, including today's jobs data & inflation figures slated for next week, for clues about the path ahead for Fed policy & interest rates.

10-year Treasury yield is flat on mixed jobs report

Americans are already thinking about the holidays & how they intend spend money this year & for many it means spending less, according to Bankrate.  In a recently-published survey of 2300 US adults, Bankrate said it found 33% of holiday shoppers reported they planned to not spend as much this year as 2023.  Consumer caution around spending & credit cards could be driving that, according to H Squared Research chief research officer Hitha Herzog.  "There’s a real convergence of shoppers who have in the past spent a lot on their credit cards and really leaned on credit card debt to take them through the holiday season. Now that interest rates are, you know, there’s talk that they’re going to come down, but they haven’t come down to a point where consumers really feel good about amassing a lot of debt on their credit card. They are now wanting to cut back a little bit more," she said.  Interest rates have been elevated as the Federal Reserve seeks to curb inflation.  The Consumer Price Index, a measure of inflation, rose 0.2% month-over-month and 2.9% year-over-year in Jul.  Inflation is expected to "change the way I shop" this year for 34% of holiday shoppers, according to Bankrate.  Other survey data points about potential budget strain & their feelings about holiday shopping costs indicated some Americans are feeling anxiety about their wallets for the season.  Bankrate also found that, on the flip-side to those expecting to open their wallets less, 24% of holiday shoppers think they will splash out more on purchases.  Another 43% see their purchases staying the same during the 2024 holiday shopping season.  "With the consumer, there’s a real bifurcation, meaning there’s a delineation – and I think it’s always been there with the consumer –  of people who are very conscious of how they spend and they want to make sure they’re staying in their budgets and they start shopping early to take advantage of sales and they’re very price sensitive. And then there are consumers who are not price sensitive," Herzog added.  The share expecting their holiday spending to go up or stay flat "are probably the people who are on the other side of the delineation where they are not price sensitive" & are still spending regardless of prices, she continued.  Doing holiday shopping online appeared poised to be the more common route among respondents, with 42% reporting they'd use the internet for "most" of their purchases & 23% saying in-store.  Some (27%) anticipate they will see themselves wrack up debt.  During the holiday period spanning Nov-Dec last year, there was $964B worth of core retail sales, the National Retail Federation reported.

More than a third of holiday shoppers' will spend less this year than in 2023

Stocks led by Tech stocks were hit with selling as investors digested a crucial jobs report that provided clues to the size of this month's expected interest rate cut & the resilience of the US economy.  Today's report shifted expectations for the Fed to enact a more sizable rate cut at its meeting in less than 2 weeks & the CME FedWatch tool, traders see a 50-50 chance of a 50 basis point cut, up significantly from yesterday.  Despite anemic closes, stocks have whipsawed this week as the market assessed incoming economic data to set expectations on the size of the Fed's rate cut.  All 3 indices are set for significant weekly declines.