Stocks on Wall Street traded lower on Tuesday and Wednesday in response to the JOLTS (Job Openings and Labor Turnover Survey) report for August, reflecting concerns that the tight labor market might lead the Federal Reserve to raise interest rates.
The U.S. dollar strengthened against a basket of currencies as the report indicated a robust labor market, potentially supporting the case for Fed tightening. U.S. Treasury prices declined, causing yields on the 10-year and 30-year notes to reach 16-year highs.
Factors such as the tight labor market, rising oil prices, and increased Treasury supply contributed to higher bond yields. As a result, stocks were seen moving lower with the S&P 500 trading about 2% lower on Wednesday compared to Monday.
The JOLTS report revealed an unexpected increase in job openings in August, particularly in the professional and business services sector. This suggests a labor market that remains tight and could influence the Fed's decision on interest rates.
Unemployment increased in August, but the quits rate remained unchanged at a 1-1/2-year low. The Federal Reserve had previously indicated the possibility of a rate hike by the end of the year. The options market is now pricing in a higher possibility that the Fed will be forced to deliver at least one rate hike before the end of the year.
The JOLTS data for August comes just a few days before the NFP data is out on Friday, which could be the key piece of data for the Fed ahead of the November FOMC meeting.
"Friday's payroll data should help clarify if the labor market is as strong as the JOLTS report implies, because at this stage of the Fed's 'last mile' to untangle the remaining 'sticky' inflation, a stronger than expected report will be the last thing the Fed wants to see, not to mention financial markets," said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.