(Bloomberg) — Stock futures fell while bond yields climbed after US jobs data signaled a still tight labor market and wages near stubbornly high levels, remaining an enduring source of inflationary pressures.
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Nonfarm payrolls increased 428,000 in April amid a drop in the participation rate, while unemployment held at 3.6%. Average hourly earnings rose 0.3% from March, falling short of economists’ estimates after an upward revision to the prior month. Earnings were up 5.5% from a year earlier.
“Markets will likely be most focused on labor supply and any prospects for cooling wage growth,” said Seema Shah, chief strategist at Principal Global Investors. “Today’s report doesn’t give much away. Participation is slightly lower and while hourly earnings growth was a touch slower than expected, last month was revised higher, so this does very little to calm fears about wage pressures. For the Fed, there is nothing in today’s report to suggest they can take their foot off the brake.”
“The story here is the participation rate. It didn’t rise, it fell, which is counter to what the Fed is looking for in order to get the demand of labor up,” said Steve Chiavarone, portfolio manager and head of multi- asset solutions at Federated Hermes. In addition, wage inflation remains elevated.”
“Even though wage growth was lower than expected in April, the labor market remains tight, and wages are likely to remain elevated for the remainder of 2022,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management.
Federal Reserve Chair Jerome Powell said Wednesday he was worried about wages rising at an unsustainable pace. Wage gains that track productivity gains are great, in the view of many central bankers, but gains that are out of line could suggest some spiraling out of control. Trading in the eurodollar options market has surged since the Fed’s interest-rate hike this week, driven by the unwinding of bets that the central bank will boost the size of its moves at upcoming meetings.
The global market selloff that saw the S&P 500 post its worst first four months of a year since 1939 has further to run, according to Bank of America Corp. strategists led by Michael Hartnett. “Base case remains equity lows, yield highs yet to be reached,” they wrote in a note to clients.
Some of the main moves in markets:
Futures on the S&P 500 fell 0.7% as of 9:03 am New York time
Futures on the Nasdaq 100 fell 1%
Futures on the Dow Jones Industrial Average fell 0.6%
The Stoxx Europe 600 fell 1.7%
The MSCI World index fell 0.5%
The Bloomberg Dollar Spot Index rose 0.2%
The euro rose 0.2% to $1.0559
The British pound fell 0.3% to $1.2328
The Japanese yen fell 0.3% to 130.64 per dollar
The yield on 10-year Treasuries advanced eight basis points to 3.12%
Germany’s 10-year yield advanced seven basis points to 1.11%
Britain’s 10-year yield advanced two basis points to 1.98%
West Texas Intermediate crude rose 1.1% to $109.42 a barrel
Gold futures rose 0.1% to $1,877.60 an ounce
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