Federal Reserve Bank Chair Jerome Powell speaks during a news conference at the bank’s William McChesney Martin building on March 20, 2024 in Washington, DC.
Chip Somodevilla | Getty Images News | Getty Images
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What you need to know today
Stocks manage to rally
Stocks in the U.S. closed out a losing week after the Dow Jones Industrial Average suffered its worst session in over a year on Thursday. But traders managed to brush off a sharp jump in yields on Friday after a stronger-than-expected jobs report. The S&P 500 gained 1.1% during the session, while the Dow climbed 307 points, or 0.8%. The tech-heavy Nasdaq Composite rose 1.24%. Meanwhile, oil prices rallied to five month highs and notched a weekly gain. U.S. crude was up 4.5% for the week while Brent added 4.2%.
Yields spike
The big market move was in the bond markets where yields suddenly climbed after the closely watched nonfarm payrolls data for March. The 10-year Treasury yield jumped 9 basis points to 4.4%, briefly touching a new 2024 high of 4.429%. The 2-year Treasury yield also rose by 10.9 basis points at 4.75%. Yields and prices move in opposite directions.
Hot jobs report
The U.S. nonfarm payrolls numbers showed job creation in March easily topped market expectations. They increased by 303,000 for the month, well above the Dow Jones estimate for a rise of 200,000. The unemployment rate edged lower to 3.8%, as expected. Parsing through the numbers, many market watchers noted that the blockbuster report would be yet another reason for the Fed to take its time, after a flurry of policymakers had this week begun speaking more conservatively about rate cuts.
Earthquake strikes northeastern U.S.
While this was all happening in markets, a magnitude 4.8 earthquake shook the northeastern U.S. on Friday morning. It was reportedly felt from Boston down to Baltimore. In New York City, there were no immediate reports of injuries or damage, but it triggered numerous delays and temporary closures of transport infrastructure.
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The bottom line
It took awhile, but after some serious thought following the jobs report Friday, markets decided they liked it and built up some steam as the day progressed.
Signs that the U.S. economy is in good shape (and the boost to corporate earnings that could provide) managed to overcome concerns that the Fed might put off its rate hikes amid inflationary pressures. This all coming after a few hawkish comments from policymakers spooked the markets on Thursday.
To be sure, the fed funds futures market is still pricing in that the U.S. central bank will start cutting in June, but it’s now barely more than a 50% chance.
There are still two more payrolls reports before the big June meeting. As David Page, head of macro at AXA Investment Managers, puts it, this is “not the be-all and end-all for the Fed’s expected easing cycle.” He also points out there’ll be three more inflation prints before then, including one this coming Wednesday.
But after a rocky week, there’s now a genuine risk that the Fed may move later than June and markets will remain on edge for a few months longer.