Wall Street was in the red this morning, reversing yesterday’s gains that came on the heels of a brief respite in the bond market chaos. As of midday, the Dow Jones Industrial Average has dipped 0.4%, snapping a three-day losing streak from earlier in the week. The S&P 500 is down by 0.5%, and the tech-centric Nasdaq Composite has shed 0.6%.
The bond market, which has been the epicenter of recent market volatility, showed signs of stabilizing. The 10-year Treasury yield eased off its 16-year highs from the previous session. This pullback in yields has offered a temporary breather to beleaguered equities, but all eyes are now on tomorrow’s critical labor market data.
Speaking of labor market indicators, today’s data revealed that U.S. weekly jobless claims were slightly up but still below economists’ forecasts. The numbers held near historic lows, suggesting a resilient labor market even as the Federal Reserve tightens its monetary policy. Specifically, applications for unemployment benefits inched up by 2,000 to 207,000 for the week ending September 30, according to the Labor Department. These jobless claim applications serve as a reliable gauge for layoffs in any given week. The four-week moving average, a less erratic metric, dropped by 2,500 to 208,750.
Despite the Fed’s decision to leave its benchmark borrowing rate untouched during its last meeting, the central bank has been aggressively combating inflation for over a year now. Since March 2022, the Fed has hiked its benchmark rate 11 times, partly to temper hiring and suppress wages. Yet, the labor market has proven more resilient than many anticipated.
Earlier this week, the government reported an unexpected jump in job openings for August. American employers listed 9.6 million job openings, up from 8.9 million in July, marking the first increase in three months. Additionally, the U.S. added a robust 187,000 jobs in August. While the unemployment rate nudged up to 3.8%, it remains low by historical standards.
On average, U.S. businesses have added approximately 236,000 jobs per month this year. Although this is a step down from the frenzied hiring during the pandemic, it’s still a robust figure. Aside from some early-year layoffs, primarily in the tech sector, companies have been keen on retaining their workforce. In fact, as of the week ending September 23, about 1.67 million people were collecting unemployment benefits, roughly 5,000 fewer than the week before.
This data sets the stage for tomorrow’s September jobs report. The recent ADP report, which came in weaker than expected, has already hinted at a cooling labor market. Such signs could make the Fed reconsider another rate hike, potentially easing some market pressure.
However, analysts are cautioning that the monthly jobs report could spell trouble for equities, regardless of whether the numbers are strong or weak, especially given the recent uptick in bond yields.
In the commodities corner, oil prices are on the decline today, fueled by worries that a global economic slowdown could dent demand. WTI crude oil futures dropped 1.8% to fall below the $83 mark, marking its most significant decline since last September. Brent crude futures also slid, down 1.9%, hovering just above $84 after breaking below this critical level for the first time since late August.
So, as traders navigate this choppy market, the focus is squarely on tomorrow’s jobs report, which could either offer a lifeline to struggling equities or send them further into the red.
