Wall Street managed to recover from Thursday’s sharp decline, marking a modestly positive start to November. Despite gains throughout the day, bond yields surged, reaching their highest levels since early July. The Dow Jones rose by 0.7%, and the S&P 500 increased by 0.43%, while the Nasdaq rebounded by 0.9%, buoyed by strong performances from Intel and Amazon. Meanwhile, the U.S. labor market produced only 12,000 non-farm jobs in October, significantly below expectations.
Wall Street managed to halt the steep decline seen on Thursday, which marked a disappointing end to October as the S&P 500 erased all its monthly gains in just one day. As November began, the market showed a moderately positive outlook. Gains could have easily dissipated as the rates market experienced a significant downturn, with yields sharply rising starting at 1:45 PM, hitting some of the highest levels since July 4th.
In the end, the Dow Jones increased by 0.7%, the S&P 500 rose by 0.43%, and the Nasdaq, which had dropped 2.8% the previous day, bounced back with a 0.9% increase to around 18,240. This rebound was slightly hindered by Apple, which saw a 1.3% decline following impressive, but unsurprising, earnings results.
The Nasdaq-100 climbed by 0.7%, bolstered by strong performances from Intel (+6.8%) and Amazon (+6.2%), along with Atlassian, which soared by 19% (valued at only $36 billion and $31 billion the day before). However, the index was weighed down by PayPal’s 2.6% drop and AMD’s 1.5% decline, compounded by interest rates that only seem to drop to rise again shortly after.
The spike in interest rates appears disconnected from employment figures: the US 10-year yield increased by 10.3 points to 4.3900% (up 15.5 points for the week), while the 30-year yield rose 10.5 points to 4.5800%. The 2-year yield saw a weekly rise of 12 points to 4.213%, a level not seen since August 1st.
Such volatility seems inconsistent with the economic data released earlier this week, especially regarding the Non-Farm Payrolls (NFP). According to the Department of Labor (DoL), the US economy added only 12,000 non-farm jobs in October, drastically below the median consensus of 113,000, following a robust 223,000 job growth in September.
‘Employment continued to trend upwards in healthcare and administration, while it declined in temporary help services and manufacturing due to strikes,’ noted the DoL.
The unemployment rate remained steady at 4.1%, aligning with expectations, while the labor force participation rate stood at 62.6%, and average hourly earnings increased by 4% year-on-year.
Additionally, job creation figures for the previous two months were revised, with August’s figure adjusted down from 159,000 to 78,000, and September’s from 254,000 to 223,000, resulting in a net revision of -112,000 for those two months.
‘The labor market likely faced various challenges in October,’ Oddo BHF had cautioned earlier in the week.
However, nobody was prepared for a staggering 95% drop in job creation, suggesting that this figure is heavily skewed and will likely see a significant upward revision next month, a prediction echoed by Joe Biden in a reassuring statement.
Another eagerly awaited statistic is the US Manufacturing PMI (calculated by S&P Global), which showed a slight improvement in October, rising to 48.5 from 47.3 the previous month; however, it still remains below the critical 50 mark that separates expansion from contraction in the sector.
S&P Global indicated that production and new orders decreased at a slower pace last month, while inflationary pressures eased, with recent hurricanes causing delays in supply chains.
Separately published, the Institute for Supply Management (ISM) provided a less optimistic view of the US manufacturing sector, reporting a contraction to 46.5 for the past month compared to 47.2 in September.
The behavior of Treasury Bonds appears to reflect an outcome markedly different from what mainstream media, which is predominantly pro-Democratic, has expected in recent weeks—namely a victory for the Democratic candidate, favored by a predominantly female voting bloc.