Stocks Tumble as Bleak Jobs Spur Rally in Bonds: Markets Wrap

Apollo Global Management President Jim Zelter discusses the state of the credit market and money being invested in AI data centers. Bloomberg

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(Bloomberg) — Volatility lashed Wall Street, with strong evidence of a cooling labor market pushing high-valuation tech stocks and crypto to big losses while bonds rallied on bets the Federal Reserve will cut rates.

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With the scarcity of data caused by the federal shutdown, investors have turned to private readings such as the Challenger, Gray & Christmas Inc. report showing companies announced the most job cuts for any October in over 20 years. Following the numbers, money markets are now implying an about 60% chance of a quarter-point rate reduction next month.

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“We are sticking to our view that the Fed will deliver a follow-up 25 basis-point cut in December because restrictive Fed policy can worsen the already fragile employment backdrop,” said Elias Haddad at Brown Brothers Harriman & Co.

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While bets on Fed cuts have powered a surge in equities alongside the artificial-intelligence boom, concerns over a stretched market surfaced. Technical indicators are increasingly flagging reasons for caution, while worries about an narrowing cohort of stocks driving the gains have become louder.

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Traders are also keeping a close eye on a slate of policymakers slated to speak on Thursday. Fed Bank of Chicago President Austan Goolsbee told CNBC that a lack of inflation data during the shutdown makes him more uneasy about continuing rate cuts.

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The S&P 500 fell 1%. The Nasdaq 100 dropped 2%. Tesla Inc. led losses in megacaps. Qualcomm Inc. became the latest chipmaker to deliver an upbeat forecast and still leave investors underwhelmed.

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The yield on 10-year Treasuries slid eight basis points to 4.08%. A dollar gauge fell 0.2%. Bitcoin lost 3%.

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Companies announced 153,074 job cuts last month, almost triple the number during the same month last year and driven by the technology and warehousing sectors. It’s the most for any October since 2003, when the advent of cellphones was similarly disruptive, said Andy Challenger, the company’s chief revenue officer.

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Meantime, Revelio Labs data showed the US lost 9,100 nonfarm jobs in October after gaining 33,000 the month prior.

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“If anything, the data reinforces the difficulty in making a case that hiring is re-accelerating,” said Vail Hartman at BMO Capital Markets. “When combined with this morning’s Challenger data, we remain skeptical of the argument that the labor market is staging a re-acceleration into year-end.”

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Don Rissmiller at Strategas says the US labor market is not collapsing, but it does not look robust to shocks either.

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“While some FOMC members have been hesitant to commit to another fed funds rate cut at their December meeting, a wobbling labor market would likely force their hand,” he noted.

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The US central bank lowered rates for a second straight meeting in October in an effort to bolster the labor market. But inflation, which at 3% in September remained well above the Fed’s 2% target, has also raised concerns among some officials that it will take longer to come down than they thought.