This morning’s employment report was a whopper, and it’s having big impacts in the markets. Gold jumped, the Treasury market initially “bull steepened” before cooling off, the dollar fell, and stocks surged after the data.
Now, let’s dive into that employment report. It showed the economy created just 12,000 jobs last month, well below the average forecast of 113,000 and the weakest since December 2020. The Labor Department also slashed its estimate of job creation in the prior two months by 112,000.
The unemployment rate held at 4.1%, though, while average hourly earnings rose a slightly stronger-than-expected 0.4%. Many economists expected “noise” in the numbers due to the two hurricane landfalls in October, plus the strike at The Boeing Co. (BA). But all in all, the figures confirm the economy is slowing – and basically lock in a 25-basis point Federal Reserve interest rate cut at next week’s meeting. That’s why all Treasury yields fell this morning, but shorter-term ones dropped more than longer-term ones (That’s the “bull steepener” trade I mentioned earlier). And it's why stocks jumped.
Meanwhile, Big Tech earnings turned out to be mostly a big disappointment this week. From Meta Platforms Inc. (META) and Microsoft Corp. (MSFT) on Wednesday to Apple Inc. (AAPL) yesterday afternoon, quarterly results just weren’t up to par.
One problem: Technology firms are spending enormous amounts of money on Artificial Intelligence (AI) infrastructure and talent, with not enough payoff to keep Wall Street happy. AAPL also projected lower-than-expected sales in the current quarter. Amazon.com Inc. (AMZN) was the only one to buck the trend, beating profit estimates on strong demand for its cloud computing services. Sales at its Amazon Web Services arm surged 19% year-over-year to $27.5 billion.
As for Boeing, it looks like it will finally get its workers back on the factory floor soon. Union voters rejected a previous contract offer, but they appear set to ratify a new one on Nov. 4. The deal offers 33,000 striking workers a wage hike of 38% spread over four years, plus a $12,000 signing bonus. BA shares have lost 43% of their value this year amid manufacturing and labor issues, plus intense regulatory pressure.
