(Bloomberg) – U.S. stocks tumbled as investors grapple with evidence of continued strength in the labor market, which could keep the Federal Reserve firmly on its way to raising interest rates. Treasury yields rose and the dollar rose further.
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The S&P 500 and Nasdaq 100 fell to session lows after December S&P Global US purchasing managers index data added more signs the economy is cooling. News that Russian President Vladimir Putin ordered a temporary ceasefire in Ukraine during the Orthodox Christmas celebrations on Friday and Saturday is unlikely to change markets.
US stocks started trading lower on Thursday after job numbers beat estimates in the private payrolls report and new jobless claims unexpectedly fell last week. Together, the data suggest that resilience in the labor market could lead to higher wages and keep the Fed positive.
The Fed has indicated that tight labor conditions allow it to continue its fight against rising prices. At the same time, officials remain concerned that financial conditions could become too loose to effectively stifle economic growth, even after the Fed embarks on its most aggressive tightening campaign in years. many decade.
“We always say don’t go against the Fed when it comes to easy monetary conditions. We must follow that wise advice as financial conditions tighten,” said Kristen Bitterly of Citigroup Global Markets Inc. reported on Bloomberg Television. “All the data we are getting tells us that they will continue on this tightening path.”
Atlanta Fed President Raphael Bostic also hurt sentiment on Thursday after he said the central bank still had “a lot of work to do” to tame inflation. He added to a chorus of hawkish Fed officials this week. Minneapolis Fed President Neel Kashkari said Wednesday he expects rates to rise as high as 5.4%, while Kansas City Fed’s Esther George said she favors increases above 5%.
The swap rate associated with individual Fed decisions has spiked and now shows a peak of the overnight effective rate of nearly 5.05% by mid-2023. The Fed’s current target range. is 4.25% to 4.5% and has about 38 basis points bullish at the next meeting in February.
Read more: Treasury yields rise as strong jobs data strengthens Fed bets
According to company news, Bed Bath & Beyond Inc. sank after warning that it might not be able to continue operating continuously. Silvergate Capital Corp. plummeted after the bank said the crypto industry’s crisis had caused deposit withdrawals. Amazon.com Inc. fell, after a short period of gains when it was reported that the company was laying off more than 18,000 employees, the biggest drop in its history.
This week’s main events:
Eurozone Retail Sales, CPI, Consumer Confidence, Friday
German factory orders, Friday
US Nonfarm Payrolls, Factory Orders, Durable Goods, Friday
Some key moves in the market:
The S&P 500 fell 1% at 10:31 a.m. New York time
Nasdaq 100 drops 1.1%
The Dow Jones Industrial Average fell 0.9%
Stoxx Europe 600 little changed
The Bloomberg Dollar Spot Index is up 0.6%.
The euro fell 0.7% to $1.0527
British Pound drops 1.3% to $1.1900
Japanese yen fell 1% to 133.94 to the dollar
Bitcoin up 0.1% to $16,843.79
Ether drops 0.2% to $1,249.69
Yields on 10-year Treasuries rose 7 basis points to 3.76%
German 10-year yield rose 6 basis points to 2.33%
UK 10-year bond yield rose 7 basis points to 3.56%
West Texas Intermediate crude rose 0.4% to $73.15 a barrel
Gold futures fell 1.2% to $1,835.90 an ounce
This story was made possible with the help of Bloomberg Automation.
–With support from Isabelle Lee and Namitha Jagadeesh.
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