The Overnight RateThree moves
Markets. The S&P 500 closed at 7,353.73 on Thursday, down 4.4% from 7,688.62, and the Nasdaq Composite fell 5.5% to 24,315.00 (CNBC, CNBC). The Philadelphia Semiconductor Index dropped 12.3% to 9,011.14 from 10,268.65 (Nasdaq). Nvidia closed at $181.60, down 9.3%. Treasury’s daily curve put the 10-year at 4.84% on Thursday, six basis points under Wednesday, with money bidding notes while equities sold (Treasury). Wednesday’s oil-led bounce in the broad indexes did not survive the afternoon. Chip stocks fell about three times as hard as the S&P 500, and Treasuries still bid for safety on the same tape. We doubt one session resets the multi-year AI build, and the mark-to-market hit for index and target-date holders is already on the statement.
Rates. Nonfarm business productivity rose 3.6% in the third quarter, with output up 3.7% and hours up 0.1% (BLS). Unit labor costs fell 0.7% as hourly compensation rose 2.9% against that productivity gain, and unit labor costs are up 2.4% from a year earlier. Real hourly compensation rose 1.1%. Labor’s share of nonfarm business output was 53.0%, the lowest reading in a series that begins in the first quarter of 1947. Fair objection: one soft labor-cost quarter does not lock the Fed’s path, and payrolls this morning can overwrite it. We’d say the print still weakens the inflation case for another hike while Kalshi’s December odds sit at 70%, down 10 points from Thursday’s issue.
Mortgages. Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed average at 7.18% for the week of Nov. 5, down 6 basis points from 7.24%, and the 15-year at 6.57% from 6.60% (Freddie Mac). That is the third consecutive weekly decline. A year ago the 30-year averaged 6.22%, so applicants are still about 96 basis points above last November. Mortgage News Daily’s daily index was near 7.17% early Friday. Some of that weekly relief is the same Treasury rally that accompanied Thursday’s equity selloff. Purchase applicants get a little more room on the payment, and the year-ago gap is still the bill that shows up at closing.
What could move prices
Kalshi last traded a December 25-basis-point hike at 70% as of 4:47 a.m. ET, down 10 points from Thursday’s issue. Polymarket (International) has two hikes this year at 68%. The near test is this morning’s employment report at 8:30 a.m. ET. A soft payrolls and wage print would lean further on those odds; a hot one would firm them back toward this week’s highs. We’d watch average hourly earnings before the headline count.
The calendar
The Employment Situation for October prints at 8:30 a.m. ET from BLS, with September unemployment still at 4.2% until today’s revision (BLS). A swing of about 50,000 jobs either side of consensus, or a one-tenth move in unemployment, would reprice December odds.
Who pays: the target-date saver
A 401(k) invested in a plain S&P 500 fund gave back 4.4% on Thursday on paper (CNBC). Savers in target-date funds that lean on large-cap growth took the steeper Nasdaq and chip drawdowns inside the same statement. The 10-year yield’s drop to 4.84% helps the bond sleeve and does not rebuild the equity mark in one night. Payrolls this morning decide whether that de-risking keeps going into next week.
Net net: when the AI complex sells off this hard, retirement accounts pay first and the Fed odds move second.
Footnotes
- Corporate: Employers announced 43,994 October job cuts, the lowest October since 2023, while Amazon’s seasonal hiring plan of 300,000 was Challenger’s largest single seasonal announcement (Challenger).
- Foreign: The Bank of England raised Bank Rate 25 basis points to 4% on an 8-1 vote, and UK two-year mortgage rates have risen nearly 50 basis points since early September (Bank of England).