Wall Street Scraps Recession Assumptions After Robust Jobs Data

(Bloomberg) -- Between a strong economy and ammunition for more Federal Reserve rate cuts, investors showed they are happy to live with the former Friday, bidding up equities after the biggest addition to U.S. payrolls in 10 months. S&P 500 futures were pointing to gains that are likely to lift the cash index’s total return in 2019 above 27% after 266,000 jobs were added in November, October was revised upward and the unemployment rate fell to 3.5%.

Here’s how investors and market watchers reacted:

JJ Kinahan, chief market strategist at TD Ameritrade:

“It was a really good report, it’s hard to find any fault in it. You look across and say ‘What was wrong with this picture?’ And there’s nothing’s wrong with this picture. It allows the Fed to do what they’ve been talking about which is sit back and observe. These rate cuts take a while to work their way through the system. People usually want instantaneous returns. Well, maybe all the things they’ve done all year have worked their way through the system or are working their way through the system in a better way. And now they can sit back, wait a little bit and see what happens.”

Dennis DeBusschere, head of portfolio strategy at Evercore ISI:

“Excellent jobs report. Some were worried post the ADP about downside risk, that proved to be an unfounded worry. Rates should move up on this report and cyclicals in general. Net net, it has been a positive week on the global data front. The global PMI composite moved higher and employment remains strong.”

Subadra Rajappa, head of U.S. rates strategy at Societe Generale, on Bloomberg Television:

“If you look at the trajectory of the pace of job creation, you can’t get too excited, too wrapped up in one number. You kind of have to look at the longer-term trend. The longer-term trend is for a gradual slowdown in the pace of job creation, that’s why you’re not seeing too much exuberance in the bond market. You’re seeing sort of a measured rise in yields across the curve as opposed to something that is more outsize. The markets going to take this in stride and put this in context with the trajectory of the pace of job creation we’ve seen.”

Jeff Mills, chief investment officer at Bryn Mawr Trust:

“This is evidence that we are in an economic background where an imminent recession could not be an investor’s base case. Companies are still adding jobs at a very healthy clip, wages are continuing to grow, the unemployment rate is low. I think the narrative is going to shift from the synchronized global slowdown to a global stabilization or even a small acceleration once data starts to come in in the first quarter of 2020. The economy is stronger than people are giving it credit for. Companies are still dealing with pretty solid demand from the consumer and to continue to meet that demand they need to hire more workers and you’re continuing to see that filter through the numbers.”

Jon Hill, BMO Capital Markets strategist:

“That the Fed’s not cutting in December was already certain; we’d also make the point that the FOMC isn’t hiking anytime soon until labor market strength bleeds over into sustained above target inflation. We’d argue that the market reaction is somewhat muted, likely due to the myriad of major risk events in the next ten days (FOMC, ECB, U.K. election, tariff deadline... etc). Look for some latent bearishness to linger in the background going into next week as these looming factors make it difficult to push any price action with high conviction, just yet.”

Tony Bedikian, managing director and head of global markets at Citizens Bank:

“This is a blowout number and the U.S. economy continues to be all about the jobs. The unemployment rate is at a 50-year low and wages are increasing. Business owners may be getting more cautious due to trade and political uncertainty and growth may be slow, but consumers keep spending and the punch bowl still seems full.”

--With assistance from Claire Ballentine and Lu Wang.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net

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