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Thursday, December 08, 2022

Treasury yields rise after stocks rise, jobs data

NEW YORK ( Associated Press) – Stock indexes ended a bumpy day on Wall Street on Friday, while Treasury yields rose, following a healthy report on the US job market reinforcing expectations of an impending interest rate hike. The S&P 500 rose 0.3% after discounting the first small gains and losses. The index posted a modest weekly gain, the third time in a row. The two-year Treasury yield rose to its highest level in more than three years in February after a report that the labor market remained strong. It topped the 10-year yield again, an unusual even that has historically been an ominous sign for the economy.

This is a breaking news update. Below is an earlier story from Associated Press.

NEW YORK ( Associated Press) – Stock indexes rose in afternoon trading on Wall Street on Friday, while Treasury yields rose, reinforcing expectations of an impending interest rate hike following a healthy report on the US job market.

The S&P 500 was up 0.2% after discounting amid small gains and losses. The benchmark index is on track for a weekly loss after two weeks of gains amid lingering concerns about higher inflation, higher interest rates from the Federal Reserve. and the economic effects of the war in Ukraine,

The Dow Jones Industrial Average bounced back from an early slide and was up 116 points, or 0.3%, at 34,794, as of 2:31 p.m. Eastern Time, and the Nasdaq Composite was up 0.1%.

The fastest action again happened in the bond marketWhere the yield on the two-year Treasury rose to its highest level in more than three years.

Yields jumped after a US government report showed employers added 431,000 jobs last month, This was slightly below economists’ expectations for 477,500, but the report also revised the figures for earlier months to show more strength. It showed growth for workers last month, but at a slower pace than overall inflation, while the unemployment rate rose from 3.7% to 3.6%.

“It was a solid report,” said Brian Jacobsen, senior investment strategist at AllSpring Global Investments.

“You can see the concerns of COVID fading. Fewer people are working remotely. Very few people are saying that they cannot work because of the pandemic.”

A separate report showed that US manufacturing continues to grow, albeit at a slower pace than in February.

A strong job market and economy give the Federal Reserve more leeway to rapidly raise interest rates to beat the high inflation prevailing in the country. The Fed has already raised its key overnight rate once, the first such increase since 2018. Following Friday’s jobs report, traders raised bets that the Fed would raise the rate by twice the normal amount at its next meeting.

Such expectations in particular drive short-term Treasury yields, and the two-year yield rose to 2.43% from 2.28% late Thursday.

The two-year yield again rose slightly above the 10-year yield, which was climbing but not as fast. The 10-year yield increased to 2.38% from 2.33%. On Tuesday, the two-year yield topped the 10-year yield for the first time since 2019, a potentially ominous sign.

Such a variation of the normal relationship between two- and 10-year returns has preceded many recessions in the past, although it has not been an ideal predictor. Some market watchers have warned that the signal could be less accurate this time due to distortions in yields due to extraordinary measures by the Federal Reserve and other central banks to keep interest rates low.

Shares of Gamestop Pending approval from shareholders to increase the number of its authorized shares, it initially grew rapidly after planning to split its stock. Such splits can bring down a stock’s share price, potentially putting it more accessible to small-pocketed investors. The stock was down 2.6% in afternoon trading.

GameStop stock has more than doubled since sitting at $78.11 in mid-March. But it still peaked at $483 in early 2021 amid the “meme stock” craze. Then, bands of small-pocketed investors joined together to pump prices to levels seen by many professional investors as irrational.

Other meme stocks have also shown renewed strength in recent weeks, though AMC Entertainment fell 8% on Friday.

In overseas markets, European shares rose marginally despite a report showing consumer prices The 19 countries that use the euro currency grew at an annualized rate of 7.5% in March, the fifth consecutive monthly record.

France’s CAC 40 rose 0.4%, Germany’s DAX 0.2% and the FTSE 100 in London rose 0.3%.

Oil and gas prices were already rising due to increased demand from economies recovering from the depth of the COVID-19 pandemic, They jumped higher after Russia, a major oil and gas producer, invaded Ukraine, fearing sanctions and export restrictions could reduce supplies.

Crude oil prices fell marginally on Friday, with US oil falling 1% a barrel to $99.27. Earlier last month, when crude supply disruptions were at their peak, it briefly touched $130.

Internationally, Brent crude fell 6% to $104.71 a barrel.

Shares in Asia were mixed.

The Nikkei 225 fell 0.6% after the Bank of Japan’s closely-watched quarterly gauge of trade sector sentiment, “Tancan”, the benchmark indicator for large makers, dropped for the first time in seven quarters.

South Korea’s Kospi fell 0.6%, while the stock in Shanghai rose 0.9%.

Rising COVID-19 cases in China are raising concerns of a regional slowdown. The lockdown in Shanghai entered its second phase of the extended restrictions, while restrictions were lifted in hard-hit Jilin.

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Associated Press Business Writer Yuri Kageyama contributed. Vega reported from Los Angeles.

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