Medicare Agent News: Jolt to the Downside

Tuesday, November 1, 2022

Jolt to the Downside

By Alex Eule | Tuesday, November 1

Powell's Problem. Stocks were heading higher this morning. Then came good news.

Thirty minutes into the trading day, the U.S. Labor Department reported its job openings and labor turnover survey, or JOLTS, data for September. The openings of 10.7 million was a surprising increase from August, defying economists’ forecast for a decline. For stocks, the jolt was to the downside.

These days, investors are looking for any excuse the Fed could use to pause its rate hikes. A slowing economy would be reason No. 1 But more job openings offers the opposite -- it suggests a still strong economy that could force employees to offer higher wages to fill opened jobs. That's a recipe for more inflation, not less. At least that was the worry today.

The JOLTS data came with members of the Federal Open Market Committee assembled for their two-day meeting that will determine the future direction of rates. The market is widely expecting a three-quarter point rate hike tomorrow. The new JOLTS report is unlikely to change that move, but it could alter the discussion the Fed members have about a future pause or pivot, as well as the tone of Chairman Jerome Powell's comments tomorrow. Here's the significance of the latest data, according to Tom Porcelli, chief U.S. economist at RBC Capital Markets:

As much as we think this hiking cycle is virtually over (our terminal forecast is 4.75%) and should be over, we just don’t see how there is any incentive for [Powell] to suggest as much right now given the financial conditions consideration (and the fact that data, for now, are hanging in there).

After the JOLTS data were released, the S&P 500 quickly fell into negative territory, after being up 0.75% at the open. The large-cap index closed the day down 0.4%.

Now the focus turns entirely to the Fed, with its rate decision expected at 2 p.m. tomorrow, followed by Powell's always newsy press conference.

Porcelli at RBC says Powell is once again walking a tightrope. If the Fed has any hope of pausing its hikes, Powell needs to first prevent any significant easing in financial conditions:

So if he really wants to transition to shallower hikes, he should maintain some element of hawkishness. How do you manage that? ... Utter these four words only: “we are not done”.