The 10-year Treasury yield surpassed 4%. According to Ivana Delevska, founder and chief investment officer of Spear Invest, this has investors concerned because the yield is a standard gauge of borrowing costs, particularly mortgage rates, which tend to reflect the 10-year yield. The cost of borrowing for households and businesses rises as the yield rises.
Bank stocks tumbled Thursday after being battered earlier this year by the failures of Silicon Valley Bank, Signature Bank, and First Republic. JPMorgan Chase sank approximately 1%, Wells Fargo fell 1.3%, and Citigroup fell about 3%.
According to the latest National Employment Report released Thursday by payroll processor ADP, US private sector employers added an estimated 497,000 jobs. According to Refinitiv, this is much more than the 220,000 jobs expected by economists.
Separately, the Department of Labor’s weekly unemployment claims climbed more than expected at the end of June, but remain significantly below pre-pandemic levels.
The jobs statistics heightened investor concerns about the Fed’s aggressive position on inflation, which was reinforced in the June meeting minutes issued Wednesday, which stated that more hikes are expected and that the central bank anticipates a mild recession later this year.
While a healthy labor market appears to be a favorable economic sign despite the Fed’s aggressive rate-hike campaign, markets interpret it adversely because the Fed may continue to raise interest rates. It also implies that the pressures that keep inflation high, such as consumer spending, are still in place.
Investors are anticipating the release of the government’s June jobs report on Friday for further information on the status of the labor market. According to Refinitiv, economists expect 225,000 new jobs in June and the unemployment rate to decline to 3.6%.
The VIX, or fear indicator on Wall Street, increased by 8% to around 15.
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