Analysis: Where are the yields going?Investors Weigh US Employment Data and Delta Concerns

New York, August 6 (Reuters)-Unexpectedly strong job numbers in July boost stocks record, boosting the case of investors who believe Treasury yields will be higher for the rest of the year It could put pressure on the stock rally that led to highs.

The 10-year Treasury yield on a price-inverse benchmark was around 1.3% on Friday, the highest level since July 23, after Labor data showed last month that the U.S. economy added 943,000 jobs. did. Analysts polled by Reuters predict salaries to add 870,000 jobs. read more

Some investors say that the Federal Reserve, which faces strong inflation and strong growth, may need to unleash its ultra-simple monetary policy sooner than expected. I believe we may support it. Such results can boost yields while squeezing growth stocks and other areas of the market.

But that view is complicated by concerns about the rise in COVID-19 cases across the United States, which could put pressure on growth, and the Fed’s claim that the current inflation surge is temporary.

In any case, the data could raise investor attention to this month’s Central Bank Symposium in Jackson Hall, Wyoming. And if August employment growth proves to be horrifying, summer employment will raise stakes at the Fed’s meeting next month, and the central bank will outline plans to roll back monthly asset purchases. May explain. read more

“This will give the market some direction,” said Simon Harvey, senior FX market analyst at Monex Europe. “This will bring the upcoming Jackson Hall event and the Fed event in September to live.” Said.

Higher yields can hinder high-tech and growth stocks with high valuations, as rising interest rates undermine the value of long-term cash flow, which many growth stocks are valued at. .. Since yields began to decline in March, these stocks have recovered and helped lift the broader market. For example, only 5 tech names or tech-related names-Apple (AAPL.O), Microsoft (MSFT.O),Amazon (AMZN.O), Google parent alphabet (GOOGL.O) And Facebook (FB.O) -It accounts for more than 22% of the weight of the S & P 500.

Higher yields can also make so-called value stocks more attractive. Stocks in banks, energy companies and other economically sensitive companies soared earlier this year, but have struggled in the last few months.

Russell 1000 Growth Index (.RLG) The counterpart value index rose about 6%, while it rose about 18% from late March. (.RLV)..

Dow Jones Industrial Average (.DJI) And S & P 500 (.SPX) A record high on Friday, up 0.4% and 0.2%, respectively, but technology-intensive Nasdaq (.IXIC) It fell 0.4%.

Art Hogan, chief market strategist at National Securities in New York, said strong economic data boosting yields could pave the way for investors to move from growing companies to a more economically sensitive cycle.

However, strong data can make dollar-denominated assets more attractive to yield-seeking investors and push up the US currency. A stronger dollar could be a headwind for U.S. exporters as it reduces the competitiveness of products abroad, while damaging the balance sheets of domestic multinationals that have to convert foreign earnings into dollars. there is.

The dollar index rose 0.57% late Friday and is on track for the largest daily rise since mid-July.

Goldman Sachs, BofA Global Research and BlackRock are one of the companies that said yields would rise to nearly 2% by the end of the year. This result could be accelerated if the boom urged the Federal Reserve Board to break down super-simple monetary policy. Faster than expected. Other banks like HSBC are looking for yields below current levels.

“I think the long-term Treasury yield recovery in the past week or so is a sign of the future,” an analyst at Capital Economics said in a memo released Friday.

“We believe US growth will be very strong in the coming quarters and the recent surge in inflation will continue more than expected,” the company said.

Reported by David Randall, Saqib Ahmed and Lewis Krauskopf. Edited by Ira Iosebashvili, Leslie Adler, Sonya Hepinstall

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