Stocks Crushed as Jobs Keep Fed on Hiking Path

Their report cited EPFR Global data showing cash funds received nearly $89 billion in the week through Oct. 5 — while investors withdrew $3.3 billion from global stock funds.

Wall Street is “rebelling against” policy tightening, the strategists led by Michael Hartnett wrote in the note published before the labor-market report.

From a technical perspective, the fact that the S&P 500 remains oversold enough alongside bearish sentiment may warrant a rebound that could materialize as early as next week, according to Dan Wantrobski at Janney Montgomery Scott.

“The data being reported alongside our proprietary cycle work to date gives us confidence that we are on the right track in anticipating more of a ‘U’-shaped market bottom and recovery in the months ahead (into 2023),” he added. “We believe the floor will be established at some point in the weeks/months ahead — but for now, investors should continue to expect a very choppy glide path due to significant macro overhang.”

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Jeffrey Roach, chief economist at LPL Financial: “In a word: ‘frustrating.’ As long as job gains are strong, the markets should expect aggressive rate hikes by the Federal Reserve.”

Michael Shaoul, chief executive officer at Marketfield Asset Management: “This report should keep expectations of any ‘dovish pivot’ at bay, and underlines our concerns that any shift in policy is much more likely to be provoked by much worse financial market conditions than a soft landing in the underlying US economy.”

Shawn Cruz, head trading strategist at TD Ameritrade: “The market has been in a ‘bad-news-is-good-news’ mentality and there’s really no bad news in this report. It’s a solid jobs report, but it’s not what the market wants to see because it doesn’t give the Fed a reason to pause or shift away from its hawkish intentions.”

Ronald Temple, managing director at Lazard Asset Management: “While job growth is slowing, the US economy remains far too hot for the Fed to achieve its inflation target. The path to a soft landing keeps getting more challenging. If there are any doves left on the FOMC, today’s report might have further thinned their ranks.”

Seema Shah, strategist at Principal Global Investors: “Today’s job number is a hawkish reading, with almost all the elements of the report moving in the wrong direction for the Fed.”

Ian Lyngen, head of US rate strategy at BMO Capital Markets: “On net, it was a strong enough read to keep a 75 bp Nov hike as the path of least resistance, but the deceleration in wage growth YoY adds to the case for a slowed hiking pace to 50 bp in December, and we still expect the final 25 bp hike in February to reach terminal.”

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