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Red-Hot Jobs Lurks Ahead of Monday Market Open

Last Friday, markets shook off the strong January 2024 jobs report. The Bureau of Labor Statistics reported unemployment rates unchanged at 3.7 with 353,000 jobs added. The job growth virtually negates the central bank’s move to cut interest rates any time soon.

Bond markets reacted quickly. Yields rose, sending the 20+ year Treasury Bond ETF (TLT) down by 2.21% to $96.07. Bank stocks did not react. JP Morgan (JPM), Wells Fargo (WFC), and Morgan Stanley (MS) shares closed fractionally higher.

Chances are rising that higher for longer rates will persist throughout 2024. The increased interest rates give savers more disposable income. They will spend the extra income on goods, boosting the economy. The U.S. government may not find the high rates ideal. The net interest cost increased to $659 billion in fiscal year 2023. It will easily surpass $1 trillion in interest payments on the $26 billion of debt.

Savers are becoming increasingly confident that Fed Chair Jerome Powell will stay the course. The economy remains strong, so it may absorb the higher rates. It will also pressure the U.S. government to control its spending. Watch out for government support in clean energy, electric vehicles, and infrastructure spending to weaken in the coming months. Spending on aerospace and defense, however, will continue.