After last week’s job report, which was a blockbuster in the US, the probability of more interest rate rises increased and US stocks and bonds fell, the dollar strengthened Monday.
Wall Street’s blue-chip S&P500 closed 0.6% lower, while the tech-heavy Nasdaq composite lost 1% as the latest non-farm payrolls report continued dimming sentiment.
Fears that borrowing costs could still rise further were stirred Monday by Raphael Bostic (president of the Fed’s Atlanta branch), who suggested that the January jobs report could cause a higher peak for interest rates.
Bostic’s Monday afternoon warning prompted a sell-off of US government bonds to gain steam. The rate-sensitive yield of the two-year Treasury was 0.19 percentage point higher at 4.49 percent, while that of the benchmark 10-year Treasury was 0.12 percentage point higher at 3.65 percent.
US equity markets fell Friday following the jobs report but rose over the week after the Federal Reserve raised its main rate by only one quarter of a percentage point. This is the lowest amount since March.
According to the report, 517,000 US jobs were added in January. This is much more than the expected 185,000 by Wall Street economists. Average earnings rose and the unemployment rate dropped to 3.4%, a record low for 50 years.