(Bloomberg) — A pair of solid economic readings shook markets on Friday, with stocks rebounding on speculation the US will be able to skirt a recession. Now the flip side to that story is that bond traders were forced to trim their bets on rate cuts in 2024 — sending yields soaring.
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All around Wall Street, the prevailing view is: While economic strength makes many investors less apprehensive about a hard landing, it also implies the Federal Reserve might have to hold rates higher for longer. For Treasuries, that means an unwinding of the massive dovish trade that pointed to a Fed pivot as early as March. For equities, jobs and consumer resilience bodes well when it comes to Corporate America.
“Just when you think the economy is finally softening, it continues to show signs of strength,” said Chris Zaccarelli at Independent Advisor Alliance. “We remain bullish on the market because we are bullish on the economy.”
Following a slew of figures underscoring a labor-market slowdown, Friday’s jobs report showed unexpected strengthening. Nonfarm payrolls increased 199,000 last month, the unemployment rate fell to 3.7% and monthly wage growth topped estimates. Meantime, US consumer sentiment rebounded sharply in early December — topping all forecasts — as households dialed back their year-ahead inflation expectations by the most in 22 years.
The S&P 500 saw its sixth straight week of gains — its longest winning run since November 2019. Wall…
