Markets today: U.S. stocks bulls back in charge as jobs fuel Fed bets

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Treasury two-year yields, which are more sensitive to imminent Fed moves, dropped seven basis points to 4.81 per cent. Swap traders are now projecting around 50 basis points of policy easing this year — which would equate to two rate cuts. The dollar saw its worst week since March. Fed Bank of Chicago President Austan Goolsbee told Bloomberg Television that additional jobs reports like Friday’s would give him comfort the economy is not overheating. Speaking separately, Governor Michelle Bowman said inflation will likely remain elevated for “some time,” but added she still anticipates price gains will eventually cool with rates held at current levels.

To Seema Shah at Principal Asset Management, the latest jobs report indeed brings the rate-cutting dialogue back into the market and perhaps explains why Powell was able to lean more dovish on Wednesday. Overall, market observers say signs of a cooling economy could nudge the Fed to lower interest rates over time — but that inflation data would be vital.

While Fed officials will likely be relieved that the labor market is cooling, this report is not soft enough to change the Fed outlook, according to Tiffany Wilding at Pacific Investment Management Co. Chris Zaccarelli at Independent Advisor Alliance says that as long as the Fed maintains rates where they are — or cuts once or twice — the market can keep moving higher.Soft macroeconomic data is needed to bring rates down and stocks up. Bullish all day.The April employment report supports the optimism expressed by Jerome Powell on Wednesday regarding how the economy would unfold in coming months, settling into a slower rate of growth with inflation coming down.

The bond market is back to pricing in two rate cuts for the year, which is a relief to stock and crypto bulls.

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