Market briefing --- Bob (fast)
Jobs report --- Peter (slow)
Fed expectation --- Su (fast)
NYSE --- Julie (slow)
welcome to the friday edition of “world financial report.” i’m bob bowden. the labor department delivered an october surprise. the monthly jobs report exceeded economists’ expectations as the economy created 337,000 jobs last month, the highest level since march. peter cook looks at the numbers from washington.
>> the report showed strength in october and a stronger job market the previous two months than first reported. the headline number, 337,000, almost double the median forecast of 175,000 from economists surveyed by bloomberg. the september number, revised upward by 43,000 from the original 96,000. to 139,000. and august was also revised upward to 198,000.
>> i actually did believe that this number would surprise on the high side, particularly after seeing the election result. i think what it’s telling us is that the august-september numberss being revised upward, that there were downward biases having to do with weather, the real numbers are showing through.
>> the unemployment rate rose to 5.5% as more people returned to the work force, according to the labor department. as many economists expected, the hurricanes played a role in boosting the report. the labor department says the storms contributed to a 71,000 increase in construction jobs and cleanup-related employment, the biggest increase in construction jobs since march of 2000. employment in service producing industries, including retailers, banks and government agency, rose 272,000 last month after 143,000 increase in september, today’s report showed. the increase was the biggest since april. the news for manufacturing, not as good. there was a drop in manufacturing of 5,000 workers and improvement over last month, but not the gain expected. economists warn not to read too much into the october numbers.
>> it’s a wonderful news because it’s a drip, drip, drip of bad news but there is the risk of a head fake if you extrapolate the surprise to the upside into the future and say, oh, we’ve definitely turned a corner in terms of concerns in the job market . a lot of the numbers are services so we have this persistent problem of creating jobs in the manufacturing sector.
>> a few other numbers to share, incomes rose last month as average hourly earnings were up .3%, in line with expectations, and average weekly hours remain the same at 33.8, consistent with expectations expectations. economists’ expectations.
>> treasuries fell the most since july after the job number came out on expectations the federal reserve will raise interest rates twice more this year. checking bonds on the day -- moving on, economists are already changing their view on how aggressively the fed will raise interest rates. deutsche bank and hsbc are among the first to revise their forecasts, saying the federal reserve is now likely to raise rates in december, as well as november. su keenan joins me with more on the fed expectation story.
>> huge surprise, this report, in the word of lehman brothers john cheney, one of many economists admitting they were caught off guard by today’s report.% the report shows jobs grew at three times shin’s prediction and lehman continues to hold the view the fed may not raise rates in december although ethan harri says next week’s interest rate increase is a foregone conclusion.
>> the fed’s basically told us they’re going to hike rates next week. december is a closer call. in the coming few meetings, it will be data dependent. if the data look strong going into the december meeting, if we see numbers as we saw today, they’ll go ahead and hike rates. if things soften back a bit in the next job report, i think there’s a case for the fed holding at the december meeting.
>> you get a clear view from b.n.p. paribas’s fixed income strategist who says the bond market has priced in the moves at each of the next two meetings
>> i think they’ll raise rates again at the december 14 meeting.
>> that takes a pause at the december meeting off the table but i don’t think it changes the landscape sufficiently in terms of the fed stepping up the pace of tightening beyond measured.
>> b.n.p. paribas securities is one of the six banks that predicted last month that the fed would raise rates twice more this year. as we mentioned, after today’s stronger-than-expected report on jobs growth, two primary dealers, hsbc and deutsche bank announced they were changing their forecast and joining the camp predicting two more rate increases this year. they were among 16 banks in the bloomberg survey who predicted last month the fed would not raise rates in december. u.s. trust’s tim mcgee says everything depends on the weeks to come.
>> i think it would be a quarter point next week, which is a done deal. then i think the fed is looking to see what happens between now and the next few weeks to decide about december and if they think they need to, they’ll raise a quarter in december.
>> fed policymakers raised their federal funds target rate a quarter percentage point at each of their last three meetings.
>> thank you, su keenan. moving on. the numbers report is dynamite for the stock market , according to the chief investment officer at huntington capital. the numbers on the day, friday, the dow up .7% -- for more on today’s trading action, here’s a report from julie hyman at the big board.% -
>> a winning day and winning week for both the dow and s&p. we did have shares not close at the highs for the day, but nonetheless, a winning day, the dow rising better than .7% on the better-than-expected jobs report. over on the s&p, the gain was smaller in today’s session for the week, gaining 3.2%, and that’s its best performance on a week in more than a year’s time. as i said, we received a bump in the morning from the better-than-expected jobs report. gains limited by speculation the fed could raise rates twice between now and the end of the year and the fact that the dollar is trading at a record low versus the euro, which could decrease foreign investment in u.s. equities. that said, we saw a strong, broad-based advance today. some of the best performers were shares seen as particularly economically sensitive, including semiconductors, technology hardware as well as auto-related shares and retailers rising again after reporting october same-store sales that beat estimates. on the downside, interest-related shares, israelis companies in particular, that group down 3.1% and other financial related shares, we saw today. diversified financials turning around by the end of the session and insurance finishing just about unchanged. banks still finishing lower. also want to talk about goodyear tire, one of the big gainers today, on an individual basis. it had a profit in the third quarter poised to perhaps beat analysts’ estimates. full results will be released in a week or so. on the down side, we had univision, spanish-language broadcaster saying fourth-quarter profit forecast was coming up short of analysts’ estimates. i’m julie hyman, bloomberg news, at the new york stock exchange.
>> a big winner today, sears shares. that stock jumped 25% after vornado realty―reality trust decide―realty trust decided to invest in the chain. the owner of office buildings and shopping centers now has 4.3% of a stake in sears. analysts say sears, which operates 871 department stores primarily in shopping malls is among retailers trading below the value of its real estate. the dollar tumbled to a record low against the euro on friday or as the chart shows, the euro rising to a record high against the dollar. despite the surge in u.s. job growth, after remarks by gerhard gerhard shroeder suggesting he would tolerate a stronger u.s. currency.
>> if you look at the data on the holdings of marketable securities at the fed for foreign institutions, they’ve really flattened out over the last eight weeks. in contrast to the previous 13 months when it was a very, very strong uptrend. so if foreign central banks aren’t buying as many dollars, the private market becomes skeptical also.
>> the dollar is down nearly 5% over the past month compared to the euro. after the break, american express chief executive ken chenault says the new partnership with mbna sigiant step in the industry.
