Wall Street had a rough week, and the damage came fast. Thursday’s sell-off erased $2.3 trillion in market value, pushed the Nasdaq into a correction and sent the VIX, the market’s fear gauge, up 70% to 28, Yahoo Finance reported on November 6. A chip-sector index that plunged 12% on Thursday bounced 4% the next day, and oil fell below $100 a barrel.
Politics added to the swings. The Dow roared back on Wednesday after the midterm results removed election uncertainty, and oil fell on hopes of a deal with Iran, according to Yahoo Finance on November 5, though the rally was already cooling.
Interest rates became the bigger worry. Payrolls rose by 165,000 in October, far above the 65,000 economists expected, while unemployment slipped to 4.1% from 4.2%, Reuters reported on November 6.
Hot Jobs Data Raises the Odds of a Rate Hike
Traders read the numbers as a sign the Federal Reserve is not done tightening. Bets on a rate hike at the next meeting rose to 78% from 70% before the report, and the 10-year Treasury yield climbed to 4.87%. The 30-year yield reached 5.27%.
Chief market economist Peter Cardillo said the labor market is at full employment and that the Fed has no choice but to raise rates in December. Chief investment strategist Susannah Streeter called the report hawkish and said she sees a couple of hikes before late next year, depending on the Iran conflict. Chief economic strategist Brian Jacobsen noted that wages rose 3.1% from a year earlier, yet real wages fell as inflation outpaced them, which he called the affordability crisis in one stat.
What Past Fear Spikes Have Meant for Stocks
Yahoo Finance’s Brian Sozzi pointed to CBOE data showing eight earlier VIX jumps of this size since 1991. The S&P 500 gained an average of 3.0% one month later and 14.7% one year later. Our list of oversold AI stocks where Wall Street analysts are spotting 50%+ upside covers names that have been through a similar reset.
Hiring itself looks steady. Andy Challenger, who tracks corporate job cuts, called the current climate a “low-fire environment,” with employers holding on to workers ahead of the holidays, according to Yahoo Finance on November 5.
Not everyone sees a hike as certain. Joe Saluzzi, co-head of equity trading at a New Jersey firm, called the jobs numbers very good but said the recent volatility could lead the Fed to hold off at its next meeting. Readers who follow the market’s leaders can see our ranking of the best stocks near all-time highs according to Wall Street.
