October's jobs report showed the labor market tightening, suggesting rate hikes might be over. The stock market cheered and had their best week for the year.
A "We Are Hiring" sign is posted in front of a restaurant in Los Angeles, California on August 17, 2022.This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribein October.
Why is the stock market cheering an early winter chill in the jobs market? Two reasons: A tighter labor market's likely to put a dent in inflation, which, in turn, should halt interest rates hikes — both of which are anathema to stocks. "The fact that this report followed other weaker-than-expected economic data points this week may encourage investors who have been waiting for a less-hawkish Fed," said Mike Loewengart, head of model portfolio construction for
Indeed, following the jobs report, markets think there's only a 9.8% chance the Fed will hike rates at its December meeting, according to theOn a weekly basis, the S&P climbed 5.85% and the Nasdaq popped 6.61%, the best week for both indexes since November 2022. The Dow gained 5.07%, its best week since October 2022.. The 2-year Treasury yield slid by around 10 basis points to 4.845% and the 10-year yield dropped 9 basis points to 4.577%.
But that doesn't mean a sustained rally in stocks, or that the higher-for-longer interest rate environment's over. Historically, when the Fed stars cutting — and if it does so abruptly — that means the economy's faltering so much it needs a boost from monetary policy. As Michael Arone, chief investment strategist at State Street Global Advisors, warned, "Investors who are eager for the Fed to be cutting rates should be careful what they wish for.
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