Digital Finance Analytics (DFA) Blog

This is our latest weekly market review, in what was another wild ride.

So now we know. The Dow skidded on Friday, as a stronger-than-expected monthly jobs report quelled hopes of a Fed pivot and shifted investor focus to the prospect of another jumbo-sized rate hike next month.

The U.S. economy created 263,000 jobs last month, above the 250,000 economists had expected, while the unemployment rate unexpectedly dropped to 3.5% as fewer than expected people entered the labor market. Wage growth of 0.3% was in line with forecasts but slowed to 5% from 5.2% in 12 months through September.

While this is a “welcome development for the Fed,” according to Jefferies, it won’t provide a ”justification for slowing from the recent pace of 75 bp rate hikes, so we expect another one at the November meeting.” The CME Fedwatch has a close to 80% probability of 75 basis points.

New York Federal Reserve President John Williams who also serves as vice chair of the rate-setting Federal Open Market Committee (FOMC) said on Friday the U.S. central bank has more work to do to lower inflation and rebalance economic activity in a more sustainable way, and he warned that the unemployment rate will most likely rise as part of that process.

“We need to get interest rates up further and basically get interest rates above where inflation is,” and that could lead the central bank towards a target rate of around 4.5%, Williams said Doing so will better balance supply with demand “in a way that brings down inflation quickly.”

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In today’s market update we look at the ongoing volatility hitting the markets at the moment – as part of the October Effect. Wall Street stocks closed lower on Wednesday, unable to sustain a late-day surge, after data showing strong U.S. labor demand again suggested the Federal Reserve will keep interest rates higher for longer. And the Russian directed Opec + confirmed a formal reduction in Oil production to try to keep prices high.

And A fifth consecutive 50-basis-point rate hike from the Reserve Bank of New Zealand (RBNZ) on Wednesday reminded investors that inflation remains the main focus of central banks. The New Zealand dollar was last up 0.14% at $0.5744, having jumped as much as 1.3% earlier in the session. The Aussie dollar was last up 0.12% near flat at $0.6494.

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