Stocks & Bonds Puked After ‘Good News’ Jobs Data
Release the hawks… good news is bad news once again.
All that hope for an imminent recession and the consequent easing and QE is dashed by a better than expected payrolls print and stocks and bonds are being pummeled for it…
As a reminder, on 6 of the last 7 payrolls days, the S&P has closed lower…
Treasury yields are soaring across the curve with the short-end underperforming… (10Y Yields are back above 3.00%)
Oil prices are rebounding as demand-anxiety eases…
And what ultimately matters – Fed rate expectations are spiking…
As Academy Securities’ Peter Tchir wrote right after the print, this gives the Fed justification for being hawkish. We should see yields drift higher on the back of this report, mostly because it should unleash hawkish statements from the Fed.
I do think the wage inflation story here is important as the Fed, at least traditionally, viewed that as a driver (versus commodity, which they used to treat as more “transitory”).
Not great for risk assets that have rallied on the back of the Fed backing down.
I cannot help but think about garbage in/garbage out, where not only did the household and establishment differ significantly, but we had meaningful downward revisions (The Household survey (which is used for unemployment rates, etc.) showed job losses of 315k. Over time the two measures tend to average out.)
Do I fully trust the data? No, but difficult to react otherwise, since there were more than enough things to tilt an already hawkish leaning Fed further into that camp.
This clearly leaves 75 bps as the odds on favorite at the next meeting.
I continue to be concerned that we are going to push too hard on the inflation fight, which might be why I can’t help buy eye the revisions and the household data, but, in any case, the wage inflation data seems pretty convincing.
Fri, 07/08/2022 – 08:47