We’ve had a clutch of US employment updates this week. On Tuesday JOLTS Job Openings came in above expectations which saw bond yields jump and stock indices fall. The following day the ADP Private Payroll report came in well below expectations, leading to a fall in bond yields and a jump in equities. Weekly Jobless Claims were in line with expectations, and failed to move markets. Then on Friday we had the latest Non-Farm Payroll update.
US stock indices slumped on the news of a 336,000 increase in September’s Non-Farm Payrolls. This was way above both the 170,000 expected, and the 187,000 prior reading, which itself was revised higher to 227,000. The sell-off came despite a small decline in Average Hourly Earnings, while the Unemployment Rate was steady at +3.8%.
The yield on the 10-year Treasury note jumped by around 12 basis points, taking it back up towards the 16-year high seen earlier in the week. The S&P had been pushing higher in early trade, getting up to 4,272 on a cash basis (December futures run with a 33-point premium). But it dropped sharply back towards 4,200 on the better-than-expected payroll report as traders saw the strong data as supporting the Federal Reserve in keeping interest rates higher for longer. The S&P bounced off its lows, but there’s no doubt that investors are jittery going into the weekend.
It's also now clear that as far as market participants are currently concerned, when it comes to economic data, bad news is good for equity markets. And bond yields and the US dollar are crucial signals as they hover around current levels.