Medicare Agent News: A Jolt to the Market

Tuesday, January 3, 2023

A Jolt to the Market

By Nicholas Jasinski | Tuesday, October 4

The Rally Continues. Bad news can be good news for investors, as far as signs of a weaker economy mean lower inflation, which means less monetary policy tightening, which means lower interest rates, which means higher stock valuations. That series of mental gymnastics has been on emphatic display over the past two days.

Yesterday's softer September manufacturing report from the Institute for Supply Management sent stocks rallying and bond yields declining. And today, the Labor Department's August job openings and labor turnover Survey—or JOLTS for short—also came up surprisingly short.

There were a seasonally adjusted 10.1 million job openings at the end of August, down from 11.2 million a month earlier. That's the greatest month-over-month decline since the depths of the Covid-19 lockdowns in the U.S. in April 2020. But investors didn't panic--they celebrated.

Facing higher interest rates and signs of a slowing economy, employers appear to be cutting back on their hiring plans. A shortage of available workers has been a major accelerant to inflation this year, pushing up wages and prompting companies to raise prices. Federal Reserve officials including Chairman Jerome Powell have said that a weaker job market would be required to rein in price increases in the U.S. economy.

This morning's JOLTS report is a step in that direction, although there were still 1.7 job openings for every unemployed American in August, far higher than the pre-pandemic ratio. It's still undoubtedly a tight labor market out there.

Should the trend continue and other economic data also point to decelerating demand for labor, goods, and services, it could give the Fed cover to slow down the pace of its interest-rate increases or pause at a lower level. That could decrease the risk that the central bank's tightening of monetary policy will push the U.S. economy into a recession.

Fresh off of yesterday's 2.6% gain—the best start to a quarter since 2009—the S&P 500 added another 3.1% today. The 5.7% combined surge is the index's largest two-day gain since early April 2020, when stocks were in the early innings of the rebound from the Covid-19 bear market low.

All 11 sectors of the S&P 500 closed up at least 1.5% today, while 497 of 503 stocks in the index rose (three companies have dual-class share structures). The Dow Jones Industrial Average rallied 2.8% and the Nasdaq Composite jumped 3.3%.

Treasury yields continued to slide from multi-year highs hit last week. The 2-year Treasury note yield is down 0.11 percentage point over the past two days, to 4.10% today. The 10-year Treasury note yield is down 0.19 percentage point this week, to 3.62%.