Bond yields decreased in response to a dramatic downward revision of US payroll data, which reinforced predictions that the Federal Reserve would cut interest rates in September. The rise in treasuries throughout the curve was driven by shorter maturities. Swap dealers are pricing in a 100 basis point decrease in 2024.
The indicated rate on the contracts indicates that traders expect the value to fall by a quarter of a point next month, with a half-point drop possible in about twenty percent of cases. Stocks saw a little rise. Normally, trade is unaffected by the annual revision of job growth, but this time it garnered attention due to recent concerns that the labor market is cooling too quickly in response to high rates.
Decline In Bond Yields
The US job growth in the year that ended in March was probably far worse than previous reports. There is likely to be an 818,000 decrease in the total number of employees on payroll for the full year that ends in March. This was the largest change that occurred since 2009.
According to Neil Dutta of Renaissance Macro Research, “the main message from the revisions is reinforced just how’silly’ it is to let the next jobs number be the determinant in whether to go 25 or 50 in September.” “This revised data suggests that the amount of jobs that will be created in the future will likely be smaller than what it is now.”
“If you are in the rate cut in September camp, these data all but’seal the deal’ on what Fed needed to cut rates,” according to Jamie Cox of Harris Financial Group. Trading will begin on Wednesday with the minutes of the most recent Fed policy meeting, before Jerome Powell speaks on Friday at Jackson Hole.
In the upcoming months, we’ll be watching for any clues about the path that rates will go in addition to any indication of when the Fed will end its current quantitative tightening program. The yield on the Treasury 10-year fell three basis points to 3.77%.
Qualitative Growth
The S&P 500 increased to over 5,610. Target Corp. experienced an 11% rise in Q2 earnings by the end of Q2 due to increased discretionary spending. Macy’s Inc. slightly undershot projections for its quarterly revenue and lowered its expectation for sales for the remainder of the year.
Marcelli claims that qualitative growth still has a lot of room to expand. She made the argument that businesses that are exposed to structural variables and have a competitive advantage should be in a better position to raise and reinvest earnings over time.
According to Mark Hackett of Nationwide, “the volatility from the previous month has settled as macro fears subside, expectations were reset, and investors used the weakness as an opportunity to add to risk exposure.”
The FOMC meeting minutes and the Jackson Hole speeches are among the Fed data that will likely set off the next wave of market volatility. This probably means we’ll have to wait until Friday to make a decision.
