Gglobal market selloff that saw the S&P 500 post its worst first four months of a year since 1939 has further to run, analysts say
Author of the article:
Bloomberg News
Rita Nazareth
A trader works on the trading floor at the New York Stock Exchange on Thursday as investor sentiment cratered in the face of concerns that the Federal Reserve’s interest rate hike the previous day would not be enough to tame surging inflation. Photo by REUTERS/Andrew Kelly Stocks fell while bond yields climbed after U.S. jobs data signalled the Federal Reserve should keep a firm grip on monetary policy amid a still tight labour market and wages near stubbornly high levels.
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The S&P 500 pushed lower, heading toward its fifth straight week of losses — the longest losing streak since June 2011. The technology-heavy Nasdaq 100 dropped about two per cent, underperforming major equity benchmarks. Treasury 10-year yields topped 3.1 per cent, while the dollar edged higher.
The Dow Jones Industrial Average fell 224.09 points, or 0.68 per cent, at the open to 32,773.88.
The S&P 500 opened lower by 18.70 points, or 0.45 per cent, at 4,128.17, while the Nasdaq Composite dropped 70.86 points, or 0.58 per cent, to 12,246.83 at the opening bell.
In Canada, the Toronto Stock Exchange’s S&P/TSX composite index was down 38.84 points, or 0.19 per cent, at 20,657.33, at the open.
Nonfarm payrolls increased 428,000 in April, while unemployment held at 3.6 per cent. The labour force participation rate — the share of the population that’s working or looking for work — slumped. That makes the Fed’s job more complicated in trying to bring labour demand in line with supply. While average hourly earnings fell short of economists’ estimates on a monthly basis, they were up 5.5 per cent from a year earlier.
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Comments: A further drop in the participation rate “could exacerbate the labor supply shortage, resulting in further wage pressures that will inevitably flow through to broad-based inflation,” said Peter Essele, head of portfolio management at Commonwealth Financial Network.
“The Fed will surely speed up the pace of tightening if the participation rate continues to decline amid a robust hiring backdrop.”“Markets will likely be most focused on labor supply and any prospects for cooling wage growth,” said Seema Shah, chief strategist at Principal Global Investors.
“Today’s report doesn’t give much away. For the Fed, there is nothing in today’s report to suggest they can take their foot off the brake.”“The story here is the participation rate. It didn’t rise, it fell, which is counter to what the Fed is looking for in order to get the demand of labor up,” said Steve Chiavarone, portfolio manager and head of multi-asset solutions at Federated Hermes. “In addition, wage inflation remains elevated.”
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“No big surprises from today’s jobs report — it largely confirms that the labour market remains tight, affording the Fed the flexibility to tackle its price stability mandate head-on,” Jason Pride, chief investment officer of private wealth at Glenmede.“The Fed likely won’t be swayed from its rate hike campaign,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley. “Since numbers came in mostly in line with expectations, the market may have already priced in a robust jobs read.”
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Article content Fed Chair Jerome Powell said Wednesday he was worried about wages rising at an unsustainable pace. Wage gains that track productivity gains are great, in the view of many central bankers, but gains that are out of line could suggest some spiralling out of control. Trading in the eurodollar options market has surged since the Fed’s interest-rate hike this week, driven by the unwinding of bets that the central bank will boost the size of its moves at upcoming meetings.
The global market selloff that saw the S&P 500 post its worst first four months of a year since 1939 has further to run, according to Bank of America Corp. strategists led by Michael Hartnett. “Base case remains equity lows, yield highs yet to be reached,” they wrote in a note to clients.
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Article content Some of the main moves in markets: Stocks The S&P 500 fell 1.3 per cent as of 9:37 a.m. New York time The Nasdaq 100 fell 1.9 per cent The Dow Jones Industrial Average fell 1.1 per cent The Stoxx Europe 600 fell 2.2 per cent The MSCI World index fell 1.5 per cent Currencies The Bloomberg Dollar Spot Index rose 0.2 per cent The euro rose 0.2 per cent to US$1.0567 The British pound fell 0.4 per cent to US$1.2317 The Japanese yen fell 0.3 per cent to 130.60 per dollar Bonds The yield on 10-year Treasuries advanced eight basis points to 3.11 per cent Germany’s 10-year yield advanced eight basis points to 1.12 per cent Britain’s 10-year yield advanced one basis point to 1.98 per cent Commodities West Texas Intermediate crude rose 1.2 per cent to US$109.53 a barrel
Gold futures were little changed Bloomberg.com
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