Get 40% Off
🚀 Our AI Picked 6 Stocks that Jumped +25% in Q1. Which Picks Will Soar in Q2?Unlock full list

Yields and dollar jump, stocks rally on blowout US jobs report

Published 02/01/2024, 09:04 PM
Updated 02/02/2024, 05:11 PM
© Reuters. FILE PHOTO: A man walks past an electronic board showing Japan's Nikkei average and stock prices outside a brokerage, in Tokyo, Japan, March 17, 2023. REUTERS/Androniki Christodoulou/File Photo

By Herbert Lash

NEW YORK (Reuters) - Treasury yields jumped, the dollar surged and world equities rallied on Friday after a blowout U.S. jobs report scuttled any lingering expectations of a near-term cut in interest rates and highlighted a strong economy.

Nonfarm payrolls increased by 353,000 jobs in January, the Labor Department's Bureau of Labor Statistics said, almost double the 180,000 forecast by economists polled by Reuters.

The benchmark 10-year Treasury note yield shot above 4% and the dollar gained against all major currencies as employers added far more jobs than expected and average hourly earnings increased 0.6% after rising 0.4% in December.

The data came after the Federal Reserve on Wednesday pushed back against market expectations for an imminent rate cut, with Chair Jerome Powell warning inflation was "still too high."

"The market has been horribly wrong about the near-term trajectory of Fed policy and this is another instance where that's the case," said Kevin Gordon, senior investment strategist at Charles Schwab (NYSE:SCHW) in New York.

"The market's been correct in assessing that the inflationary backdrop is going to help set the conditions for the Fed to cut," he said. "But it's probably ultimately the labor market that's going to push them into cutting and then will determine the pace and the size of cuts themselves."

Employment growth had been decelerating, especially into the fourth quarter of last year, but the jobs report showed job creation accelerating, said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities America.

"When you go through all the specific details, there were really very few if any pockets of weakness. It was just a very, very strong report and that by itself would suggest that a recession certainly isn't imminent," he said.

MSCI's gauge of stocks across the globe closed up 0.64% while on Wall Street, the tech-laden Nasdaq and benchmark S&P 500 climbed 1.74% and 1.07% respectively, as investors cheered robust quarterly results from Meta Platforms (NASDAQ:META) and Amazon.com (NASDAQ:AMZN). Gains by the Dow Industrials were a bit more subdued, rising 0.35%, but low unemployment and a strong economy suggest corporate earnings can increase. Meta surged 20.3% to hit a record high after issuing its first dividend days ahead of Facebook's 20th anniversary, along with a revenue and profit beat on advertising sales in the holiday shopping period. U.S. regional bank stocks recovered slightly from a brutal sell-off sparked by concerns that New York Community Bancorp (NYSE:NYCB)'s dismal earnings signaled broader problems for the sector.

NYCB shares were up 5.0% following a nearly 45% plunge over the last two sessions after the lender slashed its dividend and posted a surprise loss on commercial real estate loans.

In Japan, Aozora Bank slumped to a three-year low after it took a huge loan-loss provision against U.S. office loans.

After the jobs report, money markets projected the Fed would lower its target rate, currently in a range of 5.25%-5.5%, by 123.8 basis points by year-end, down from 140.3 bps just before the data was released.

Futures pared bets for a rate cut in March to 20.5% from 36.5% just before the report, and slashed the likelihood of a 25 or 50 bps cut in May to 61.8% from 91.6%, according to CME Group's (NASDAQ:CME) FedWatch Tool.

"I'll trade a stronger economy with less rate cuts than a weaker economy with more rate cuts," said Keith Lerner, chief market strategist at Truist Wealth in Atlanta.

The two-year Treasury yield, which reflects interest rate expectations, surged 17.6 basis points to 4.370% and the 10-year's yield rose 16.5 basis points to 4.028%. The two-year's rise was on track to post the biggest one-day gain since May 2023, and the 10-year since July 2023.

Investors brushed off a big Chinese market selloff caused by a lack of hoped-for government stimulus.

The blue-chip CSI300 hit a five-year low, with the Shanghai Composite 1.5% lower on the day and down 6.2% for the week, its largest weekly loss since October 2018.

The dollar index, a measure of the U.S. currency against six others, jumped to a seven-week high as it rose 0.83%, while the euro was down 0.74% to $1.0792. The yen weakened 1.24% to 148.29 per dollar.

Oil prices fell by about 2% after the U.S. jobs data reduced the odds of imminent rate cuts, which could dampen crude demand if restrictive monetary policy curbs the economy.

U.S. crude futures settled down $1.54 at $72.28 a barrel, while Brent fell $1.37 to settle at $77.33. Both benchmarks posted losses of more than 7% for the week.

© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 1, 2024.  REUTERS/Brendan McDermid/File Photo

Gold prices slipped as the dollar jumped, making bullion more expensive for overseas buyers, and higher yields reduced the appeal of non-interest bearing gold.

U.S. gold futures settled 0.8% lower at $2053.70 an ounce.

Latest comments

The reason why people don't make it in crypto is because they haven't made a good decision towards their investments, this man has been the only one that has helped me out in some of my trade which has really helped me alot I pray God bless him and your family write him in wAsPP +31612574318) 554643434646494879764545421313121245578797675456431312121515457879797846461213121215457879797646454313121216154948787667646434212151649497979764646494545461312161548797646464646131549764648464649494
Robert Kiyosaki: "The stock market is climbing higher and higher. Idiots believe the economy is strong. Don't be fooled. The Magnificent 7 (Microsoft, Apple, Google, Amazon, Meta, Nvidia and Tesla), funded by U.S. government dollars, are keeping the stock market rising. Please be cautious. The stock and bond markets are about to crash."
Robert Kiyosaki : "Le marché boursier grimpe de plus en plus haut. Les idiots croient que l’économie est forte. Ne vous laissez pas berner. Les Magnificent 7 (Microsoft, Apple, Google, Amazon, Meta, Nvidia et Tesla), financé par les dollars du gouvernement américain, maintiennent le marché boursier à la hausse. S'il vous plaît soyez prudents. Les marchés boursiers et obligataires sont sur le point de s'effondrer."
Lol. How come? All spike… Stagflation? Crash in advance
Stagflation? Inflation is subsiding and economy is growing. Do you understand the meaning of stagflation?
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.