On Friday, the US stock market experienced a significant upward movement, driven by robust job data for September 2023. The Dow Jones Index surged by 0.87%, the S&P 500 index rose by 1.18%, and the tech-heavy Nasdaq skyrocketed by 1.60%. Additionally, MSCI’s global stocks gauge closed up 1.0%, while the pan-European STOXX 600 index saw a gain of 0.82%.
Market experts attributed the surge in the US stock market to the positive job data, as it alleviated concerns about a potential US Federal Reserve (Fed) rate hike scheduled for November 2023.
Marvin Loh, senior global macro strategist at State Street in Boston, commented on the situation, suggesting that the economy may have structurally changed to the point where real yields need to be higher than in the five years before the pandemic. He added, “We are in a period where it’s unclear how much slowing of the economy 500 basis points have actually generated,” referring to the Fed’s interest rate increases since March 2022.
Following the release of the job data report, the yield on the benchmark 10-year Treasury note surged by more than 13 basis points in just half an hour, reaching a 16-year high of 4.8874%. However, bond yields later moderated, and the three major US stock indexes rallied as investors perceived slowing wage growth as a sign of decelerating inflation.
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, stated, “We’ve raised rates, inflation is coming down and the economy is booming,” adding that it’s a positive scenario as long as inflation continues to decrease.
The focus has now shifted to the possibility of a US Fed rate hike in November. Futures traders raised the probability of such a hike to 29.2%, up from 23.7% before the release of the job data. The Fed’s overnight rate was priced above 5% through next July.
The US dollar index, which measures the greenback against six other currencies, initially rose but then fell, declining by 0.24%. This drop followed an 11-week winning streak for the dollar, during which it reached its highest level in approximately 11 months earlier in the week.
The positive job data and the subsequent market reaction underscore the dynamic nature of the financial landscape and the significance of economic indicators in shaping market sentiment.