Bonds, hot jobs report chip away at stocks

Momentum is growing for the Federal Reserve to raise interest rates, if not at its September meeting then later this year. Wall Street isn’t happy about that.MANHATTAN (CN) — Wall Street saw some wild swings this week, as another bond sell-off brought on by the Iran conflict and a hotter-than-expected jobs report hit equities.After wild swings throughout the week, the Dow Jones Industrial Average closed out the week down 146 points, with the S&P 500 gaining seven points and the Nasdaq 104 points, respectively.On Friday, investors were unhappy with a decent jobs report, which showed the U.S. economy added 162,000 jobs last month, triple what most analysts had forecast.The reason for the negativity was it gives more ammunition to interest rate hawks at the Federal Reserve, which meets next month. Prior to the jobs report, many economists predicted the Fed would hold the federal funds rate at 3.5% to 3.75% when it meets Sept. 16.However, with a hot jobs report, the Fed now will focus much more on inflation data, which has been creeping upward in recent months.“Even the most committed dove would struggle to find anything in the August employment report to justify keeping interest rates unchanged,” Stephen Brown, chief North America economist at Capital Economics, wrote in an investor’s note.Brown noted the Fed is likely to focus even more on the next round of inflation reports due next week to make its interest rate decision, and if inflation continues as it has been that could be enough to push the central bank to hike rates.At least one person wants to Fed to cut rates, and he was very vocal about it Friday following the jobs report. President Donald Trump lauded the report but then quickly pivoted to a call for the central bank to lower interest rates.“We should have the LOWEST RATE of any country in the World, like the ‘old days,’” Trump wrote in a social media post Friday morning. “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.”Trump likely won’t get his wish, given the threat of inflation, energy price spikes, and supply-chain problems.Those concerns caused another bond sell-off earlier this week, as yields for government bonds hit multi-decade highs. Oil prices also rose again after the United States struck Iran, with diesel prices hitting a new record high.The renewed conflict with Iran also won’t likely help supply chain problems, which have been exacerbated by the jammed-up Strait of Hormuz and demands from the artificial intelligence build-out.In the latest manufacturing report from the Institute for Supply Management, several companies raised concerns about worsening supply chain problems, with one commenter writing the “supply chain situation, especially in the electronics market, is going through another crisis even bigger and more complicated than during and post-Covid-19.”Prior to Friday’s jobs report, the Fed’s most recent Beige Book, which tracks economic activity around the country, indicated most members at the central bank were leaning toward keeping rates steady. Despite price pressures easing in three of the 12 districts and only rising in one, experts believe the Fed has grown hawkish.“While the Beige Book suggests underlying price pressures are moderating gently, more Federal Reserve officials appear to be losing patience with persistent, above-target inflation,” according to an investor’s note by Oxford Economics Chief U.S. Economist Michael Pearce.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads