NEW YORK (Reuters) – The U.S. labor market remained stuck in its doldrums of low hiring and layoffs through September, although the broader economy “may be on a somewhat firmer trajectory than expected,” Federal Reserve Chair Jerome Powell said on Tuesday.
He noted that authorities will take a “meeting-by-meeting” approach to any further interest rate cuts, while balancing labor market weakness with the fact that inflation remains well above its 2% target.
Powell also said that the end of the central bank’s long effort to reduce the size of its holdings, widely known as quantitative tightening, or QT, could be in sight.
His comments came from the text of a speech prepared to deliver to a meeting held by the National Association for Business Economics in Philadelphia.
MARKET REACTION:
STOCKS: US stocks were mixed, with the Dow and S&P 500 rising during the day, while the Nasdaq fell.
BONDS: US Treasury yields extended their decline, with the yield on the benchmark 10-year bond falling to 4.03% and the two-year bond falling to 4.1%.
FOREX: The dollar index extended its losses and is now down 0.3% at 99.03.
COMMENTS:
STEVE SOSNICK, CHIEF STRATEGIST, INTERACTIVE BROKERS, GREENWICH, CONNECTICUT:
“The reason for the overnight sell-off was concern about the re-acceleration of the US-China trade war. But the markets decided that this is not really a problem, at least in the short term.”
“The market was going up anyway. We were down 10 points before he started talking, so this is just the icing on the cake on today’s rally… but most of the move was unrelated to his comments.”
ADAM SARHAN, CEO, 50 PARK INVESTMENTS, NEW YORK: “The fact is, the (stock) market extended. It pulled back to technical support, which is the 50-day moving average… and bounced off it.”
“The Fed said nothing has changed. Even if (trade) tensions rise… the Fed is still going to cut rates with the stock market at all-time highs. So, fundamentally, we have a tremendous tailwind coming into effect in the near future.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
“I don’t think (Powell) is changing his tune at all. He’s saying the economy is on solid footing, but he’s also saying we have weakness. What he’s doing is preparing markets for a series of rate cuts, but not necessarily in a sequential order.”
“What it says is that it will cut (interest rates) by 25 basis points at the end of this month and then they will evaluate the situation. And if the labor market continues to weaken and actually loses jobs, then it could be setting us up for a huge 50 basis point cut in December.”