Yields rise after better-than-expected July jobs report
The 10-year Treasury yield rose to 2.834% on Friday morning after the July jobs report, which came in well above expectations and showed solid employment growth for the month. Earlier this month, the 10-year Treasury yield hit 2.5%, its lowest since April, as the bond market worried about a possible recession.
At the same time, the 30-year Treasury yield rose to 3.078%. Yields are inverse to price.
—Carmen Reinicke
Bank of America raises Fed rate hike forecast for this year
Bank of America economists added another quarter point of a rate hike to their forecast for Federal Reserve rate hikes this year, following July’s strong jobs report.
The firm’s economists expected a 50 basis point hike in the fed funds rate for September, followed by a 25 basis point hike in November. Now they also expect a hike of 50 basis points, or half a point, in November. They left unchanged their forecast for a quarter-point increase in December.
One basis point is equal to 0.01 of a percentage point. The Federal Reserve raised the target fed funds rate by 75 basis points in both June and July.
The fed funds futures market is also pricing in a rise of 75 basis points for September, following a report that 528,000 jobs were added in July, more than double expectations.
-Patti Domm
The market expects a bigger rate hike from the Federal Reserve in September
Traders react on the floor of the New York Stock Exchange (NYSE) as a screen shows Federal Reserve Board Chairman Jerome Powell during a press conference following a Fed rate announcement in the city of New York, on July 27, 2022.
Brendan McDermid | Reuters
July’s much stronger than expected jobs report took markets by surprise and has Fed watchers raising expectations for rate hikes.
The economy added 528,000 jobs in July, more than double expectations. According to Peter Boockvar, chief investment officer at Bleakley Advisory Group, Fed funds futures for October are now priced at a 72% chance of a 75 basis point hike in September, up from 18% from Thursday (one basis point is 0.01 of a percentage point)
Boockvar said the market is also pricing in some of the rate cut he expected next year, and June 2023 futures were 25 basis points higher, putting Fed funds expectations at 3.54%.
“This is hot. For the Fed, this is another 75 basis point hike,” said Diane Swonk, chief economist at KPMG. He said the September rate hike could be 75 basis points, not 50, based on the jobs report alone. “The Fed is dealing with strong demand in a supply-constrained economy, and that demand extends to labor,” Swonk said.
-Patti Domm
Stocks down at market open
Stocks fell at the opening bell on Friday after a better-than-expected jobs report. The Dow Jones Industrial Average fell 217 points or 0.66%. The S&P 500 fell 0.96% and the Nasdaq Composite fell 1.36%.
—Carmen Reinicke
The 75 basis point hike in September is almost a done deal, Shah says
The stronger-than-expected July jobs report means the Federal Reserve is likely to raise interest rates by three-quarters of a percentage point at its next meeting, as opposed to the half-percentage-point hike that was expected in the markets, Seema Shah, world head. said strategist at Principal Global Investors.
“Today’s blowout number means a 75bp increase in September is almost a done deal. Not only is the labor market certainly still tight, but wage growth is uncomfortably strong,” Shah wrote in a Friday note. “The Fed has its work cut out for it to create enough slack that can ease price pressures.”
“All the jobs lost during the pandemic have now been recovered. But while this is positive news, markets will take today’s number as a timely reminder that there is still much more hiking ahead for the Fed.” he said. “Rates are above 4%; today’s figure should put any doubts to bed.”
—Carmen Reinicke
Cramer on why stocks react negatively to jobs
Jim Cramer on Squawk on the Street, June 30, 2022.
Virginia Sherwood | CNBC
“This number is extraordinary. We are a growing country. The rest of the world is not,” Jim Cramer said on CNBC’s “Squawk Box” after the hard-hitting report.
But Cramer warned about what it means for stock prices and explained why we’re seeing the negative reaction in futures.
“It means that obviously when they come back (the Fed) stays hot, they’re going to do another three quarters,” Cramer said. “That’s not what we thought. Remember, we bought this market thinking they’re at 50 (basis points).”
After raising rates by 0.75 percentage points for the second time in a row last week, the central bank will meet next to decide interest rates in September. Traders had expected them to slow to a half-point increase in that meeting. The S&P 500 is up 8% in the past month through Thursday’s close.
— John Melloy
Stock futures fall after better-than-expected jobs report
Stock futures fell on Friday after the July jobs report came in much stronger than expected, showing more jobs added, a lower unemployment rate and higher-than-expected wage growth economists predicted.
Dow futures fell 231 points, or 0.71%. Futures linked to the S&P 500 fell 1.08% and Nasdaq futures fell 1.33%.
—Carmen Reinicke
July employment report beats expectations
The US economy added far more jobs than expected last month. On Friday, the US government said 528,000 jobs were added in July, easily beating the Dow Jones estimate of 258,000.
Of course, average hourly earnings rose 5.2% year over year, well above expectations. This could be seen by the market as a sign that inflationary pressures remain strong.
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—Fred Imbert
Elon Musk believes we are past peak inflation
“The last two years have been an absolute nightmare of supply chain disruptions, one thing after another, and we’re still not out,” Tesla CEO Elon Musk said.
Patrick T. Fallon | Reuters
Elon Musk said he believes we are past peak inflation and predicts a mild 18-month recession.
Musk’s comments came at Tesla’s 2022 shareholder meeting on Aug. 4.
“We have a good view of where the prices of things go over time because when you’re making millions of cars, you have to buy commodities many months ahead of when they’re needed,” he said.
—Carmen Reinicke
Amazon to acquire iRobot in $1.7 billion deal
Amazon will acquire iRobot for $61.00 per share, the consumer robot company announced on Friday. The cash transaction is valued at approximately $1.7 billion, including iRobot’s net debt.
Shares of iRobot paused on the news. The sale price of $61 per share is a 22% premium to Thursday’s close of $49.99. Amazon shares rose about 2% in premarket trading.
—By Michelle Fox
DoorDash surges after record orders
A Doordash delivery man rides his bicycle in the rain during the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, USA, November 13, 2020.
Carlo Allegri | Reuters
Shares of DoorDash rose more than 10% in premarket trading Friday after the company reported quarterly results that beat expectations after the market closed Thursday. The food delivery service said orders grew 23% year-over-year in the quarter and revenue rose 30%.
The company expects softer consumer spending in the second half of the year, he said.
—Carmen Reinicke
Oil prepared for heavy weekly loss
Oil prices were moderately lower in Friday morning trading on Wall Street and on track for steep weekly losses. Concerns about a slowdown in demand have pushed prices down in recent sessions.
West Texas Intermediate crude futures, the US oil benchmark, are down 10.5% for the week, while international benchmark Brent crude is down 14.5%.
– Pippa Stevens
Bitcoin, Ether on track for worst week since July 1st
Cryptocurrencies have fallen this week after a rough start to the month. Bitcoin and Ether are down around 3% year to date and on pace to post their first negative week in five.
The performance would also be the worst weekly drop since July 1, when Bitcoin lost 8.71% and Ether lost 13%.
—Carmen Reinicke
Warner Bros. it sinks
Leslie Grace attends the premiere of Warner Bros. of “The Suicide Squad” at The Landmark Westwood on August 2, 2021 in Los Angeles, California.
Axelle/bauer-griffin | Cinematic magic | Getty Images
Stifel raises second-half S&P 500 target
Stifel’s Barry Bannister raised his second-half S&P 500 target to 4,400 from 4,200, noting that he continues to favor cyclical growth stocks in sectors such as software and media.
Here are two reasons why Bannister hit his target:
- “S&P 500 1H22 selloff still reversing”.
- “The S&P 500 also discounts negative S&P 500 EPS y/y in 2022, but we see 2022 EPS holding.”
Bannister’s new target implies 6% upside from Thursday’s close.
—Fred Imbert
European shares flat ahead of key US jobs report
European markets were flat on Friday morning as investors tracked corporate earnings and awaited the key US jobs report.
The pan-European Stoxx 600 was little changed in early trade. Autos gained 0.8% while insurance fell 0.8%.
Gains continue to drive the price movement of individual stocks in Europe. Allianz, Deutsche Post, the London Stock Exchange Group and WPP were among the companies that reported before the bell on Friday.
– Elliot Smith
Asian markets shake off fears over military tensions around Taiwan
Asia-Pacific markets rose on Friday as investors shrugged off fears of China’s military exercises near Taiwan, which follow US House Speaker Nancy Pelosi’s visit to the self-governing island this week.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.74%. Mainland China’s Shanghai Composite gained 0.28% and the Shenzhen Composite rose 0.64%.
Taiwan’s Taiex rose more than 2 percent, and chipmaker TSMC rose 2.8 percent.
Official data shows that Taiwan is more dependent on China than the US for trade. Just over 22% of Taiwan’s imports in 2021 were from mainland China and Hong Kong,…