U.S. stocks pushed close to record territory after the latest employment report eased concerns in the bond market, helping investors regain their footing heading into the final quarter of the year.
Wall Street posted broad gains in recent trading after a new jobs report delivered a reading that markets found reassuring. Stocks climbed toward record levels as bond market turbulence — which had been rattling investors in recent sessions — began to settle down.
The bond market had been a source of anxiety. When bond yields rise sharply and unexpectedly, they can push up borrowing costs across the economy, from mortgages to corporate loans. That kind of pressure tends to weigh on stock prices, because higher rates make future company earnings worth less in today’s dollars. A calmer bond market removed some of that headwind.
The jobs report appeared to strike a careful balance. Strong but not overheated employment data is generally what markets want to see right now. Too many jobs added can signal that inflation may stay stubbornly high, prompting the Federal Reserve to keep interest rates elevated longer. Too few jobs raises fears that the economy is losing momentum. A reading that lands in the middle tends to give investors confidence that the Fed can manage a so-called soft landing — slowing inflation without tipping the economy into a downturn.
The Federal Reserve has been navigating a delicate path, raising rates aggressively over the past few years to bring inflation down from multi-decade highs. Labor market data has become one of the most closely watched indicators for clues about how the central bank might act next. A jobs report that does not push the Fed toward more aggressive action is typically welcomed by both stocks and bonds.
With major indexes approaching record highs, investors will now watch for more economic data and any signals from Fed officials about the path of interest rates. Earnings season is also approaching, which will provide another lens on how businesses are holding up under the current rate environment.
The next key tests will be upcoming inflation data and any fresh remarks from Federal Reserve officials, both of which could shift market expectations quickly.
