Jobs, North Korea Bring Volatility Back to Financial Markets

Volatility returned to the financial markets on Monday as investors reacted to positive U.S. economic news about the jobs market and a negative geopolitical development.

First the good news, according to the Bureau of Labor Statistics, the number of openings was at 6.2 million on the last business day of the month, a record high. This represents an increase from 5.7 million on the last business day of May.

Further research shows that the June number is the highest reported since the Labor Department began tracking the series in December 2000. The previous monthly job openings record was set in July 2015.

The Labor Department report went on to say that for the month of June, reported hires and separations were little changed at 5.4 million and 5.2 million respectively.

On the negative side, U.S. military intelligence official said North Korea has successfully created a miniaturized nuclear weapon designed to fit inside missiles. The Washington Post first reported the development Tuesday, citing a confidential intelligence assessment.

U.S. Equities

U.S. stock indexes are trading higher at the mid-session with the blue chip Dow Jones Industrial Average and benchmark S&P 500 Index notching record highs on the back of a surge in financial stocks.

At 1744 GMT, the Dow is trading 22129.97, up 11.55 or +0.05%, the S&P 500 Index is at 2484.06, up 3.15 or +0.13% and the tech-based NASDAQ Composite is at 6406.05, up 22.28 or +0.35%.

The strong jobs news triggered a sharp rise in U.S. Treasury yields which lead to a jump in financial sector stocks. This move pulled up the Dow and the S&P 500.

Stocks retreated from their highs after the news about North Korea was released.

U.S. Treasury Markets

U.S. Treasury yields rose on Tuesday after the release of the jobs report. The yield on the benchmark 10-year Treasury Note traded at 2.271 percent, while the yield on the 30-year Treasury Bond rose to 2.852 percent.

The data and the price action suggest that investors are increasing the chances of a rate hike by the Fed in December.

U.S. Dollar

September U.S. Dollar Index futures rebounded from early weakness after the U.S. Labor Department reported a record high number of job openings in June. The price surge took out Friday’s high which was reached on the back of robust U.S. Non-Farm Payrolls data for July.

Gold

December Comex Gold futures gave back all of their earlier gains and took out last Friday’s low after the U.S. Dollar surged in reaction to the U.S. jobs data. The news drove up U.S. Treasury yields, making the U.S. Dollar a move attractive investment while driving down demand for dollar-denominated gold. Demand for lower-yielding assets also fell as investors poured money in the higher-yielding stock market.

Gold bounced off its low after the North Korea data was released. This was likely profit-taking and some flight to safety speculation.