(Bloomberg) – Stocks fell ahead of Friday’s jobs report as rising oil prices amid geopolitical tensions triggered a flight to the safest corners of the market. U.S. Treasuries rose and the dollar ended near its all-time high.
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The S&P 500 fell 1.2%, erasing its gains. Brent crude oil fell per barrel as Israeli Prime Minister Benjamin Netanyahu said at a security cabinet meeting that Israel would take action against Iran and its proxies and harm those who seek to harm Iran. It exceeded $90. President Joe Biden told Netanyahu in a phone call that U.S. support for the war depends on new measures to protect civilians.
“The real question is why are oil prices rising again?” said Miller Tabak's Matt Maley. “Oil supplies are likely to be restricted.” east. This hasn't been a problem before, but it could become one soon. ”
Bond yields fell across the U.S. curve even after Minneapolis Fed President Neel Kashkari said there may not be a need for rate cuts this year if inflation stalls. He was one of more than half a dozen central bank officials to speak ahead of the release of the March jobs report.
Healthy U.S. employment growth is likely to continue in March even as wage growth slows, according to a Bloomberg survey of economists. Employment is expected to rise by at least 200,000 people for the fourth straight month. Average hourly wages are expected to rise 4.1% year-on-year, the smallest annual increase since mid-2021.
“As always, the monthly jobs report will have the final say,” said Chris Larkin of Morgan Stanley's E*Trade. He said, “Investors will be looking for a 'Goldilocks' number that doesn't give the Fed a reason to delay rate cuts, but doesn't suggest that the labor market is in a deep downturn.”
There is no clear consensus on the market's reaction to Friday's jobs report, according to a survey conducted by 22V Research. Among investors surveyed, 29% believe the response will be 'risk-on', 32% say 'risk-off' and 39% are betting on a 'mixed/negligible' response. I answered.
“Average hourly wage has replaced salary as the most important labor metric,'' said Dennis Dubuscher of 22V. “This is consistent with inflation being investors' top concern. But investors are also watching labor data most closely.”
Bond investors are more likely to buy U.S. Treasuries if there is a fall in March's jobs report, according to research conducted by BMO Capital Markets' Beil Hartman and Ian Lingen.
As a result, 57% of respondents said they would buy if U.S. Treasuries fell after the announcement. Even if bond prices rose in response to the news, about two-thirds of investors said they would do nothing.
Countdown to job report:
The market will be sensitive to data points that suggest more inflation in the pipeline. If job creation is in line with or slightly below expectations, a moderate outlook for hourly wages would provide some comfort.
In the grand scheme of things, one month's data doesn't matter all that much, but as current market sentiment is starting to lean away from the idea that the downward trajectory of inflation is intact, the data that shifts the story back to its original position is , which would support inflation. market.
We expect the March payroll statistics to lose further momentum, with the cumulative number of issuers remaining at just under 200,000.
A result below consensus could lead to a “bullish steepening” of interest rates as market prices for interest rate cuts rebound. FedSpeak has signaled it will place more emphasis on inflation data than growth data, but Chairman Jerome Powell pointed to the policy's “risks on both sides.” The market is expected to command higher prices for weaker readings than for stronger readings.
While the market is likely to react to small deviations from consensus, it will take a large upside or downside to sustainably change futures market expectations for three 25 basis point cuts in the federal funds rate this year. We feel we're going to need a surprise.
When weighing the data against our internal models, leading indicators point to this month's non-farm payrolls report being slightly above expectations, although there is significant uncertainty given the current situation. , major employment growth could be in the range of 200,000 to 250,000. global background.
The March jobs report is widely expected to strengthen the continued resilience of the labor market, continuing to give the Fed sufficient flexibility to pursue long-term policy increases.
Company highlights:
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The Federal Trade Commission could challenge the acquisitions of hundreds of companies, including Pfizer, Baxter International and Thermo Fisher Scientific, even after the agency's antitrust review deadline has passed. he warned.
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Alphabet Inc. is in talks with its financial advisers about a potential takeover bid for HubSpot Inc., an online marketing software company with a market value of about $34 billion, Reuters reported on Thursday.
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Ford Motor Co. is delaying the launch of its three-row electric sport utility vehicle by two years and extending layoffs for 2,700 Canadian workers who were scheduled to begin production in 2025.
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Boeing Co.'s latest 737 Max crisis has deepened airlines' shortage of the popular narrowbody jet, with rental costs for used jets reaching their highest level in years.
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Levi Strauss & Co. soared after cost-cutting measures boosted profit margins and a bet on baggy jeans and denim skirts boosted sales by more than expected.
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Amyrix Pharmaceuticals is treating patients with a progressive, fatal neurological disease after a trial showed that patients who took the drug did no better on a variety of measures than those who took a placebo. The company plans to withdraw its therapeutic drug from the market.
This week's main events:
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Eurozone retail sales Friday
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U.S. unemployment rate, nonfarm payrolls, Friday
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Fed's Michelle Bowman, Thomas Barkin and Laurie Logan speak on Friday
The main movements in the market are:
stock
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As of 4 p.m. New York time, the S&P 500 was down 1.2%.
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Nasdaq 100 falls 1.5%
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The Dow Jones Industrial Average fell 1.4%.
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MSCI World Index falls 0.6%
currency
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Bloomberg Dollar Spot Index little changed
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The euro was almost unchanged at $1.0835.
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The British pound fell 0.1% to $1.2639.
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The Japanese yen rose 0.3% to 151.25 yen to the dollar.
cryptocurrency
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Bitcoin rose 4.3% to $68,560.51.
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Ether rose 1.9% to $3,370.09
bond
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The 10-year Treasury yield fell 5 basis points to 4.30%.
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Germany's 10-year bond yield fell 3 basis points to 2.36%.
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The UK 10-year bond yield fell 4 basis points to 4.02%.
merchandise
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West Texas Intermediate crude rose 1.4% to $86.64 per barrel.
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Spot gold fell 0.6% to $2,285.89 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Isabel Lee, Craig Sterling, Vince Gall, Edward Bolingbroke, Carter Johnson, Julia Fanzeles, Felice Marantz, and Liz Capo McCormick.
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