Main U.S. indexes turn red, now down >0.7%; banks hit harder
*
Utilities down most among S&P sectors; Energy sole gainer
*
Euro STOXX 600 index off ~0.7%
*
Dollar, crude rise; gold, bitcoin down
*
U.S. 10-Year Treasury yield rises to ~3.84%
Oct 6 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at
THE UNEMPLOYMENT LINE IS GROWING - WOO-HOO! (1032 EDT/1432 GMT)
U.S. labor demand is showing early signs of softness as a months-long barrage of interest rate hikes from Powell & Co are beginning to make themselves felt.
So, in this topsy-turvy upside-down world of hot inflation, a hawkish Fed and recession jitters, bad news can be good: tightening monetary policy appears to be working, a prospect which could afford the central bank to pivot back to a less aggressive stance, perhaps sooner than anticipated.
The number of U.S. workers filing first-time applications for unemployment benefits surged by 15.3% last week to 219,000, landing 16,000 north of consensus, according to the Labor Department.
A combination of low participation and a record number of job openings has resulted in an extremely tight labor market and has put upward pressure on wage growth, which has stoked market participant fears that decades-high inflation could be the exact opposite of 'transitory,' which was a favorite Fed adjective until it wasn't.
The central bank fired the opening rate hike salvo six months ago, when jobless claims touched their lowest level in generations. Last week's print is a considerable 31.9% higher than the March nadir of 166,000 claims.
Even so, the Fed hike tantrum isn't likely to subside any time soon.
"Any easing of labor market conditions will be welcome by the Fed but won't change the FOMC's plans to continue to raise rates in an effort to bring down inflation," writes Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "The labor market should still be characterized as tight, with the ratio of job openings to unemployed workers still elevated in August despite a small decline."
Ongoing claims, reported on a one-week lag, inched 1.1% higher to 1.361 million
Separately, the stack of pink slips promised by U.S. firms grew 46.4% taller in September, surging to 29,989 total job cuts.
Executive outplacement firm Challenger, Gray & Christmas' (CGC) planned layoffs report also shows a 67.6% increase from September of last year.
"Some cracks are beginning to appear in the labor market," writes Andrew Challenger, senior vice president at CGC. "Hiring is slowing and downsizing events are beginning to occur."
Still, labor market tightness lingers. The 209,495 job cuts announced year-to-date are 21% below the same time last year. That ship is only just starting to change course.
"We expect layoffs to rise gradually over coming months in response to Fed tightening, which will weigh on demand," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "But for now, having faced persistent labor shortages, businesses are still holding on to rather than letting go of workers."
So far this year, automotive, healthcare and technology sectors have been hardest hit.
Investors now look to the Labor Department's always-hotly-anticipated employment report due Friday morning, which is expected so show payroll growth of 250,000 in September, with the jobless rate holding steady at a low 3.7%.
As shown in the graphic below, Fed rate hikes amid low unemployment and spiking inflation are often prelude to recession:
Wall Street is now heading lower on Wednesday, ceding territory won in robust rallies earlier in the week.
An uptick in benchmark Treasury yields have put bond proxies on the run, with utilities and real estate falling hardest.
The FAANG gang are once again weighing heaviest.
U.S. STOCKS ARE MIXED AND MODEST IN EARLY TRADE (0955 EDT/1355 GMT)
The main U.S. stock indexes are mixed early on Thursday, though changes are relatively modest, after data showing an increase in weekly jobless claims suggested the Federal Reserve may need to ease its aggressive monetary tightening cycle.
With this, however, the U.S. dollar is stronger, while the U.S. 10-Year Treasury yield is rising back up over 3.80%.
S&P 500 sectors are mixed with energy out front of the gainers. Defensive bond-proxies are on the weaker side.
Chips are outperforming with a gain of more than 1%, and growth is on track to outperform value for a third-straight session.
Meanwhile, the S&P 500, at just over 3,765, still faces resistance in the 3,810.32/3,815.20 area. Wednesday's high was at 3,806.91 before the benchmark index then backed away. Support is at Wednesday's low of 3,722.66 and then 3,712.
Here is a snapshot of where markets stood around 20 minutes into the trading day:
BITCOIN: RUMBLE, STUMBLE, OR CONTINUE TO BUMBLE? (0900 EDT/1300 GMT)
Since collapsing into its June lows, bitcoin has essentially been range trading, making no progress for more than three months.
However, given what are now especially compressed daily historical volatility readings, and strong positive correlations with U.S. equity indexes, a bitcoin breakout may coincide with either a surprising risk-on charge, or another market panic:
Since bottoming on June 18, one trading day after the S&P 500's intraday low, and down 72% from its Nov. 8, 2021 record close, bitcoin has struggled to make progress. Its summer rally stalled with its August-15 intraday high, one day prior to the intraday highs in the main equity indexes. Both bitcoin, and stocks, were then whacked.
However, bitcoin bottomed on Sept. 21, or nine trading days ahead the stock indexes' Sept. 30 troughs.
Meanwhile, on Oct. 3, bitcoin's daily Bollinger Band (BB) width fell to 0.087. Of note, over the past several years or so, major bitcoin moves have come in the wake of sub-0.2 daily BB width readings. Low BB width does not in itself predict direction, but it can indicate a market especially ripe for much more spirited action, or its next significant trend.
The recent BB width low was its tightest since October 10, 2020. In the wake of the Oct. 9, 2020 BB width trough, bitcoin enjoyed an upside breakout leading to a massive bull-run.
Bitcoin, now around $20,200, could continue to range trade, however, given especially compressed daily historical volatility, traders are on alert for a next big move.
A forthright thrust, and close, above the upper daily BB, now just over $20,400, will have potential to spark a sharp band-width rise, and an upside breakout.
A close below the 20-day moving average, now around $19,400, can flip pressure back toward a downside range break.
Violating the lower daily BB, now around $18,400, can also spark a sharp band-width rise, and lead to a slide to new lows.
Of note, bitcoin's Nov. 8 record close coincided with the record close in the small-cap Russell 2000, and came just nine trading days ahead of the Nasdaq Composite's Nov. 19 record finish.
Bitcoin's rolling 50-day correlations with the RUT, and IXIC, now stand at a robust 0.77 (+1.00 is a perfect positive correlation). Thus, if bitcoin resolves its range, one way or the other, U.S. equity indexes will likely be coming along for the ride.
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE: