Business Maverick: Bond Yields Surge as Jobs Bolster Rate-Hike Bets: Markets Wrap

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U.S. equities fluctuated and Treasury yields surged as a solid U.S. jobs report may strengthen the Federal Reserve’s case to use aggressive interest-rate hikes to tackle inflation.

The S&P 500 edged higher while the U.S. yield curve extended its recent flattening as investors evaluated the economic outlook amid tightening monetary policy and Russia’s war in Ukraine. The dollar gained as U.S.slightly missed expectations and the March unemployment rate fell to 3.6%. Meanwhile, an ISM manufacturing survey disappointed, with higher than expected prices paid.

“Although today’s job report was a little softer than expected, it still paints a picture of a steaming labor market,” said Seema Shah, chief strategist at Principal Global Investors. “The final vestiges of Covid-19 are close to being fully eradicated from U.S. economic data – the unemployment rate is just a touch above the pre-pandemic level and the number of people on temporary layoff is back to where it was before March 2020.

Investors begin a new quarter wondering if the fighting in Ukraine, the isolation of Russia and the Fed’s increasingly hawkish turn will engender still more volatility and losses for stocks and bonds. Raw materials are the only key asset class to deliver major gains so far in 2022 as global stocks finished the quarter with their first loss since the pandemic bear market.

“The U.S. had great momentum in early 2022, but the outlook has darkened due to the Russia-Ukraine war, which is raising energy and food prices in the U.S. as well as globally,” Bill Adams, chief economist at Comerica Bank, said. “The shock to consumer prices, and to a lesser extent to exports, will weigh on the recovery in the rest of the year, and cautions against extrapolating from early 2022’s trend.”the U.S.

Russian stocks gained for a third day, the longest winning streak since trading resumed on March 24, as talks between Ukraine and Russia resumed. Russian Foreign Minister Sergei Lavrov said Moscow is preparing a response to Ukraine’s proposals on ending hostilities.

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