Negative start for Wall Street after the release of November employment data. The Dow Jones and the S&P500 slip 0.9% and the Nasdaq slips 1.2%.
The job report highlighted the creation of 263,000 new jobs, far above the 200,000 units expected by analysts. Furthermore, the October survey was revised upwards to 284 thousand units, from the 261 thousand initially communicated. The unemployment rate was stable at 3.7%, while average hourly wages grew by 0.6% in the quarter and by 5.1% on a trend basis, more than estimated.
Labor market tightness and upward pressures on wages confirm Chairman Jerome Powell’s words in recent days that the Fed still has a lot of work to do to get prices under control.
On Wednesday, the president opened to a reduction in the pace of rate cuts, reinforcing the prospect of a 50 basis point hike in December, but he also stressed that the cost of borrowing will have to rise to 5% or even more. Today’s data consolidates the idea that the central bank will keep the cost of money at restrictive levels for some time to come, in order to effectively fight inflation.
Volatility also on Forex, with the euro/dollar falling back to 1.048 while on bonds, the US 10-year yield rises by 7 bps to 3.58% and the two-year yield, more sensitive to expectations on the Fed’s moves, rises by over 11 points to 4.34%.