Quick Read
-
SPY gained just 0.3% and TLT barely budged, a muted market reaction to a jobs report that sharply raised rate-hike expectations.
-
Hiring beat forecasts by about 2.5 times, with wages up 0.4% in the month, handing the Fed fresh reason to tighten.
-
San Francisco Fed President Mary Daly said the Fed will likely have to tighten further to bring down inflation that is still too high.
-
Building a portfolio and living off one are two completely different skills, and almost nobody teaches the second. This problem is what The Definitive Guide to Retirement Income helps, and it is free today. Read more here. (Sponsor)
Traders now treat a December Fed rate hike as the likely outcome. On Friday, November 6, CME FedWatch put the probability of a quarter-point (25-basis-point) December hike at 76.8%. A week earlier, it was 66.9%. The jump came after October employment rose by 165,000, exceeding LSEG's consensus.
That number is a market-implied probability drawn from futures pricing, and the Fed has given no guidance about December. A hike would lift the federal funds target range from 3.75%-4.00% to 4.00%-4.25%.
The State Street SPDR S&P 500 ETF Trust( NYSEARCA:SPY ) rose 0.32%, while the iShares 20+ Year Treasury Bond ETF( NASDAQ:TLT ) barely moved. That was a quiet reaction to a sharp shift in rate expectations.
Fed Officials Were Already Leaning Toward Another Hike
Measured within the day, the probability of a December hike rose from 70% earlier Friday to 78% after the data came out. That is a separate measure from FedWatch's week-over-week comparison.
The Fed hiked on September 16 by a 12-0 vote. It then held on October 28 by a 10-2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack disagreeing because they wanted another hike.
Now Available: The Definitive Guide to Retirement Income
Many successful investors eventually reach the same moment. The saving is done, the portfolio is built, and the question quietly changes from how much can I grow this to how much can I take out? Get that second question wrong and decades of good investing can come apart in a handful of years.
That is exactly what The Definitive Guide to Retirement Income helps answer. It covers what your retirement could actually cost, which income sources are worth using, and the withdrawal math that decides whether the money lasts. It is free today from Fisher Investments. Read More Here ›
San Francisco Fed President Mary Daly said Friday that the Fed will likely have to tighten further to bring down inflation that is still too high. She gave no timing or size and said she prefers a deliberate, gradual approach. She also called the revaluation of technology stocks painful but measured.
Employment Ran Far Ahead of the Forecast
The October gain compares with an average monthly gain of 48,000 over the prior 12 months, and it came in at about 2.5 times the consensus forecast. Revisions raised August to +186,000 and September to +60,000, adding 84,000 jobs combined.
Broad hiring supports a hike: professional and business services added 70,000 jobs, health care 42,000, transportation and warehousing 25,000, manufacturing 19,000.
Wages matter most to a Fed focused on inflation because pay gains feed into service prices. Average hourly earnings rose 0.4% to $38.00, up 3.1% from a year earlier.
Unemployment was little changed at 4.1%, inside the 4.1% to 4.3% range it has held since March. The weak spot was part-time work for economic reasons, which rose by 339,000 to 4.8 million people.
Short-Term Yields Moved While Long Bonds Held Steady
The two-year Treasury yield rose to 4.51% from 4.46%, a bigger move than the ten-year's rise to 4.86% from 4.84%. That pattern shows traders revised their view of the near-term path of Fed policy. The dollar index gained 0.7% shortly after the release.
Stocks rebounded after Thursday's AI and chip selloff, which pushed the S&P 500 down 4.36%. The index rose 0.31% on Friday to close at 7,376.86 but still fell 2.68% for the week ended November 6.
SPY reached $742.21 during the day before giving back much of its gain. TLT slid just 0.01% to $81.92.
Inflation Data and Jobs Report Will Set Up the December Fed Meeting
October consumer price index (CPI) data arrives on Tuesday, November 10, at 8:30 a.m. ET, and the November jobs report follows on Friday, December 4. Those are the last major data points before the Federal Open Market Committee meets December 8-9.
Higher policy rates reduce what future earnings are worth in today's dollars, and SPY is heavily weighted toward the technology stocks that led Thursday's decline. That leaves SPY exposed to further pressure if the Fed hikes at the December meeting.
TLT offers little protection, because long-duration bonds lose the most value if hikes continue. Short-duration Treasury yields tend to rise along with each Fed hike, which limits price risk at the front of the curve.
This view weakens if October CPI comes in cool and SPY closes back above $742.21. If CPI runs hot and FedWatch's December odds climb past 77%, pressure on SPY will likely build.
Released: The Definitive Guide to Retirement Income
(Sponsor) Most people spend their entire working lives focusing on one thing: growing a pile of money. Then they retire and discover the skill they actually need is close to the opposite. Turning that pile into steady income, year after year, through good markets and bad, without ever running out.
It may be the least discussed and most consequential transition in personal finance, and plenty of otherwise careful investors walk into it with no real plan. That is exactly what The Definitive Guide to Retirement Income helps answer. It is a free guide from Fisher Investments covering what your retirement will really cost, where the cash flow should come from, and how much you can safely withdraw each year. Learn more here. Learn More Here ›
Contact editorial@247wallst.com for any questions or corrections.
