Stocks and Bonds Fall as Jobs Fuel Fed-Hike Bets: Markets Wrap
(Bloomberg) — Wall Street’s historic weekly run is poised to come to a halt, with stocks and bonds falling after a solid jobs report added to speculation the Federal Reserve’s next interest-rate move will be a hike.
While there was a lot to like in Friday’s economic data, the figures came at a time when war-fueled inflation risks are creating a challenge for the Fed. The 1% drop in the S&P 500 prevented the index from notching a 10th straight week of gains, with a tech rout weighing heavily on trading. Treasury two-year yields jumped 11 basis points to 4.15%. Swaps are fully pricing in a rate increase by the end of 2026. The dollar rose. Bitcoin sank.
US job growth topped all forecasts in May and the unemployment rate held steady at 4.3%, offering the clearest sign yet that the labor market may be breaking out of a prolonged period of lackluster hiring.
“Today’s upside surprise underscores ongoing economic resilience, but it will also likely keep the Fed — and the markets — focused on inflation pressures,” said Ellen Zentner at Morgan Stanley Wealth Management.
The market may be treating today’s good news as bad news for equity prices, but this is a knee-jerk reaction as bond markets reprice the Fed path, according to Neil Dutta at Renaissance Macro Research.
“Ultimately, if the Fed is hiking because of expanding employment, I would not necessarily assume it is bad for the stock market outlook,” Dutta said. “Stagflation is bad for stocks, an inflationary boom is not.”
“With a great Jobs Report, like just announced, stocks should go up, not down. That’s the way it was for 200 years. Growth does not mean inflation! How else can a Country attain GREATNESS???” President Donald Trump noted in a social-media post.
White House National Economic Council Director Kevin Hassett said investors are incorrect in interpreting the strong jobs report as suggesting the Fed will have to raise rates this year.
“I think that’s terribly wrong,” Hassett told Bloomberg Television. “What you need to do is look at the impact of oil-price shocks on core inflation and the history of it is that they are temporary, they don’t lead to lasting inflation.”
Swaps indicated traders expect a quarter-point increase in the US central bank’s target for the federal funds rate by the December policy meeting, with a roughly 60% chance of a move in October. Fed officials next meet June 16-17 under the leadership of new Chairman Kevin Warsh.
“If Chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence,” said Seema Shah at Principal Asset Management. “Our base case remains that the Fed stays on hold through 2026, but if employment data continues to track around May’s pace, rate hikes this year would come firmly into play.”
Corporate Highlights:
SpaceX has already received orders for more than the shares available in its record-setting $75 billion initial public offering, according to people familiar with the matter, shortly after starting to formally market the deal. Nvidia Corp. has certified the three biggest memory chipmakers to supply their most advanced high-bandwidth products for the US company’s AI accelerators, Chief Executive Officer Jensen Huang confirmed for the first time. After swapping out its lead autos analyst, JPMorgan Chase & Co. is decidedly less bearish on Tesla Inc., hiking its price target to $475 and upgrading the stock to the equivalent of a hold. Anthropic PBC called for the creation of a system in which governments and AI developers collectively decide when to slow work on the technology to stave off the risks it may pose. Lululemon Athletica Inc. shares tumbled after the upscale yogawear company cut its annual forecast due to deteriorating performance in North America. Some of the main moves in markets:
Stocks
The S&P 500 fell 1% as of 11:07 a.m. New York time The Nasdaq 100 fell 2.2% The Dow Jones Industrial Average fell 0.2% The Stoxx Europe 600 was little changed The MSCI World Index fell 1% Currencies
The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.5% to $1.1556 The British pound fell 0.3% to $1.3385 The Japanese yen fell 0.2% to 160.27 per dollar Cryptocurrencies
Bitcoin fell 4.2% to $60,929.41 Ether fell 9.9% to $1,598.52 Bonds
The yield on 10-year Treasuries advanced six basis points to 4.53% Germany’s 10-year yield advanced one basis point to 3.03% Britain’s 10-year yield was little changed at 4.89% The yield on 2-year Treasuries advanced 11 basis points to 4.15% The yield on 30-year Treasuries advanced three basis points to 5.00% Commodities
West Texas Intermediate crude fell 1.8% to $91.33 a barrel Spot gold fell 2.4% to $4,367.64 an ounce ©2026 Bloomberg L.P.
