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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