U.S. stocks extended gains Tuesday, with markets closely tracking moves in Treasury bond yields, as investors looked to extend back-to-back winning sessions for the S&P 500 ahead of a key stretch of job market data releases.
The Bureau of Labor Statistics published its monthly reading of job openings, better known as the Jolts report, which showed a headline figure of 8.83 million, the lowest since March of 2021 and well shy of Street forecasts of a 9.5 million tally. payroll processing group ADP following on Wednesday with its National Employment report for the month of August.
The BLS is also slated to publish its key non-farm payroll update on Friday, with economists looking for only modest net jobs addition of 186,000 with potentially quicker gains in average hourly earnings.
Labor market strength was a key component in the hawkish rate message from Federal Reserve Chairman Jerome Powell last week in Jackson Hole, and further indications that strength is feeding into wage growth could cement the case for another quarter point hike in interest rates from the Fed before the end of the year.
At present, the CME Group's FedWatch suggests an 80.5% chance that the Fed stands pat next month, with bets on a November rate hike now pegged at 44.5%.
"Our view is that the Fed is becoming even more data-dependent so this week of economic data will be especially important for asset allocators," said Jeffrey Roach, chief economist for LPL Financial in Charlotte.
"As inflation pressures ease and the job market cools, investors could see more improvement in equities as markets look to 2024," he added. "Job growth in August might be the lowest monthly gain since 2020 but wages seem to remain hot."
Treasury yields turned lower in the wake of the Jolts data with 2-year notes falling 12 basis points to 4.880% following a solid auction of $45 billion in new paper on Monday while 10-year notes were pegged 12 basis points lower at 4.114%. The U.S. dollar index, meanwhile, fell 0.4% lower against a basket of its global peers to trade at 103.656
On Wall Street, the S&P 500 was marked 53 points higher in early afternoon trading while the Dow Jones Industrial Average gained 228 points. The tech-focused Nasdaq was up 219 points amid the pullback in Treasury yields.
Overnight in Asia, the region-wide MSCI ex-Japan index rose 0.33% into the close of trading as markets reacted to a series of moves from Beijing over the weekend to shore-up its internal financial markets.
That 'risk on' sentiment flowed into Europe, as well, where the Stoxx 600 benchmark gained 0.73%, and traded at a two-week high, while Britain's FTSE 100 returned from its traditional August Bank Holiday weekend to rise 1.52% in early London trading.
- Action Alerts PLUS offers expert portfolio guidance to help you make informed investing decisions. Sign up now.
