The 10-year Treasury yield fell to a new three-month low on Tuesday as the number of job openings posted by employers dived more than expected in October. The Nasdaq composite and S&P 500 gained ground after the data, while the Dow Jones Industrial Average pared losses.
Labor Department data also showed that the percentage of employees quitting private-sector jobs held steady. Meanwhile, an Institute for Supply Management survey of service-sector firms showed that business activity increased moderately, while employment picked up slightly.
The data showing a normalizing labor market is good news for the Federal Reserve and generally positive for hopes of a soft economic landing.
Job Openings, Quits Rate
The Labor Department said that employers posted 8.733 million job openings in October vs. expectations of 9.4 million. October job openings were revised to 9.35 million from 9.55 million initially reported.
The JOLTS report "should bring abundant holiday cheer as the probability of a soft landing continues to rise," wrote Nick Bunker, director of economic research at Indeed Hiring Lab. The key signal is that as job openings declined, "hiring remained largely unchanged, a sign that the labor market isn't falling off a cliff."
The private-sector quits rate held at 2.6% for a fourth straight month. That metric reflecting worker turnover has returned to its level just before the pandemic. Economists see the quits rate as a leading indicator of where wage growth is headed. At this level, as before the pandemic, wage pressures should continue to moderate.
ISM Services
The ISM service-sector survey index rose to 52.7 from 51.8 in October, coming in slightly above estimates. Readings above 50 indicate expanding activity. The employment subindex rose a half-point to 50.7, pointing to a modest rise in labor utilization.
November Jobs Report Due
The ISM service-sector employment reading suggests that Friday's jobs report may show a modest pace of hiring last month. On Friday, the ISM manufacturing survey index showed the employment gauge falling one point to 45.8, consistent with factory job losses.
Still, the resolution of strikes at General Motors, Ford Motor and Stellantis should mean a gain of about 30,000 auto jobs, reversing the prior month's decline.
Economists expect the employment report to show a net gain of 180,000 jobs, including 150,000 in the private sector. The unemployment rate is seen holding at 3.9% as average hourly wage growth ticks down to 4%.
10-Year Treasury Yield, Nasdaq Reaction
The 10-year Treasury yield slid 12 basis points to 4.17%, the lowest since Sept. 1. The 10-year yield peaked at 4.99% on Oct. 19.
The dramatic fall of the 10-year Treasury yield has come as the Fed's battle against inflation appears largely won. Rate cuts are now expected to begin by March.
The lower 10-year yield, which analysts use to discount the value of future earnings, takes pressure off growth stock valuations.
The Nasdaq rose 0.6% and is within 1% of its 52-week closing high on July 20. The S&P 500 reversed early losses, rising 0.1%, while the Dow Jones was off 0.2%. Both the S&P and Dow have hit 52-week closing highs in recent days.
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