A big risk right now is if this labour shortage will become a common theme: Equity strategist
The long-awaited U.S. jobs report triggered small moves in the equity market, with investors weighing whether a sharp slowdown in U.S. hiring would make the Federal Reserve delay a reduction in economic stimulus.
Traders turned to the perceived safety of technology giants, while most groups in the S&P 500 fell.
Volume was low ahead of the Labor Day holiday. The Treasury curve steepened, with the gap between 5- and 30-year yields increasing. Investors also assessed a Bloomberg News report saying that Senate Democrats are discussing a wider range of tax proposals than President Joe Biden envisioned, including levies on stock buybacks, carbon emissions and executive compensation.
The addition of 235,000 jobs in August -- the smallest gain in seven months -- suggests central bankers will need to see improvement before starting to slow bond buying, according to several analysts. Meantime, President Biden said the economic recovery remains “durable and strong,” blaming the retrenchment in hiring on the spread of the delta variant of coronavirus.
- “This is a major miss and screams delta disruption,” said Seema Shah, chief strategist at Principal Global Investors. “Today’s very weak number will likely sway the Fed to a November taper, if not later.”
- “The jobs report means slower economic growth, but also means the Fed is not going to tighten any time soon, and that should significantly limit any negative impact on markets,” said Brad McMillan, chief investment officer at Commonwealth Financial Network.
- “I don’t think it’s going to change much for the Fed taper timeline,” said Zhiwei Ren, portfolio manager at Penn Mutual Asset Management. “The consensus is November, December. We have a number that was weak, but if we look below the surface, it’s quite strong actually because of wage growth.”
- Gap between 5- and 30-year yields increases
- In the run-up to the jobs report, equity funds attracted US$19.2 billion of inflows, trailed by the US$12.7 billion allocated to bonds, according to Bank of America Corp. The firm cited EPFR Global data for the week through Wednesday. Outflows from cash funds were the biggest in seven weeks, with US$23 billion exiting.
Some corporate highlights:
- Travel companies such as Carnival Corp. and American Airlines Group Inc. fell as employment in leisure and hospitality -- which had posted strong gains recently -- was flat in August.
- Moderna Inc. said it completed its submission to U.S. regulators for clearance of a booster dose of its COVID-19 vaccine.
- Forte Biosciences Inc. plummeted after its only product in development failed to have an effect on a common skin disease.
- Broadcom Inc., one of the world’s largest chipmakers, climbed after giving a bullish sales forecast, helped by demand for components used in corporate computer networks and smartphones.
Some of the main moves in markets:
- The S&P 500 was little changed as of 4 p.m. New York time
- The Nasdaq 100 rose 0.3 per cent
- The Dow Jones Industrial Average fell 0.2 per cent
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index fell 0.2 per cent
- The euro was little changed at US$1.1880
- The British pound rose 0.2 per cent to US$1.3864
- The Japanese yen rose 0.2 per cent to 109.70 per dollar
- The yield on 10-year Treasuries rose four basis points to 1.32 per cent
- Germany’s 10-year yield advanced two basis points to -0.36 per cent
- Britain’s 10-year yield advanced four basis points to 0.72 per cent
- West Texas Intermediate crude fell 1 per cent to US$69.26 a barrel
- Gold futures rose 1.1 per cent to US$1,831 an ounce