Stocks are rebounding after yesterday’s brutal tech sell-off. Bonds and MBS are down after a stronger-than-expected jobs report.
There wasn’t any identifiable catalyst for yesterday’s tech sell-off, which drove the NASDAQ down 5.5%. The AI darlings have been vulnerable for a while, and credit default swaps continue to widen which signals more financial distress in the space. Politics was a contributing factor, but these stocks had gotten a bit ahead of themselves and are being re-priced.
The economy added 165,000 jobs in October, according to BLS. This was well above the street estimate of 62,000 jobs. The unemployment rate fell to 4.1%. The household survey indicated that 463k more people were employed in October as the number of unemployed fell 49k and the number of discouraged workers fell by 293k.
Professional / business services saw the biggest increase in jobs – 70k – and health care rose by 53k. Transportation and warehousing rose 25k.
Nonfarm productivity increased 3.6% in Q3 as output rose 3.7% and hours worked fell 0.1%. Unit labor costs decreased 0.7% as compensation rose 2.9% and productivity rose 3.7%.
Home prices fell 0.1% quarterly and rose 2% annually according to the Clear Capital Home Data Index. Quarterly home price appreciation has been declining with rising rates. The Northeast region saw the biggest appreciation while the West lagged.
In the commentary, I write about the stress in the AI / data center space and what it means for real estate prices and interest rates.
Richmond Fed President Thomas Barkin said that interest rates might have to rise gradually in order to get inflation back to the 2% goal. “Unemployment’s near record lows, and inflation is too high. That means the path is pretty straightforward. The question, of course, is pace,” Barkin said in the talk with CNBC’s Steve Liesman.
“Gradual makes sense if you think there’s uncertainty in the world, and if you think that there’s information you’re going to get in the period. And I think that’s still a pace that makes sense to me,” he added.
Cleveland Fed President Beth Hammack expressed similar views yesterday.
