Stronger-than-expected inflation data and blowout job growth in September reignited interest rate worries. Amid the increasing possibility of another rate hike by the Fed, rising Treasury yields, and growing geopolitical tensions due to conflict between Israel and Hamas, the stock market could remain highly volatile in the near term.
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The Consumer Price Index grew 0.4% in September and 3.7% year-over-year, according to a Bureau of Labor Statistics report. Dow Jones estimates were 0.3% and 3.6%, respectively. The core inflation, excluding food and energy prices, increased 0.3% for the month and 4.1% from a year earlier, in line with economists’ expectations.
Further, robust job growth in September poked a hole in the Federal Reserve’s cooldown narrative. The U.S. economy added about 336,000 jobs last month, almost twice what economists expected. Also, data for August was revised higher to show 227,000 jobs were added instead of the previously reported 187,000.
The recent surge in U.S. treasury yields has also sparked more anxiety among investors. On Friday, the yield on the 10-year U.S. Treasury note jumped to 4.88% for the first time since 2007, while the 30-year offering reached 5.05%, which is also a 16-year peak.
Some investors on Wall Street are bracing for enhanced volatility into year-end as yields and oil prices surge, inflation remains sticky, the job market shows resilience, and conflict ensues in the Middle East. However, a focus on earnings and what the Fed will do with interest rates can provide investors optimism in the short term, according to Barclays analyst Ajay Rajadhyaksha.
“Bond volatility and Middle East tensions are a…
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