US non-farm payroll hits a one-year high, US bond yield big pump, Fed may pause rate hike in November?

The 'small non-farm' ADP employment report released by the United States on Wednesday showed that the number of private sector employment increased by 233,000 in October, far exceeding expectations. If the non-farm report on Friday also performs strongly, economists predict that the Fed is likely to 'pause rate cuts' in November. (Background: US continued claims for unemployment benefits reach a three-year high, US bond prices rebound, is the Fed's rate cut in November stable?) (Background: US bond yields continue to rise, 'hitting expectations of rate cuts', Dow plunges 400 points, Goldman Sachs: S&P 500 golden decade is over) The ADP employment report, known as 'small non-farm', released by the United States on Wednesday, according to CNBC, showed that the number of private sector employment in October increased by 233,000, far exceeding Dow's expectations of 113,000 and also higher than the upward revision of 159,000 in September, reaching the highest level since July 2023. Nela Richardson, chief economist at ADP, said, 'Despite the recovery after two hurricanes, employment growth in October remained strong and resilient.' The data, contrary to the expectations of a slowdown in the US economy and employment in October, highlights the resilience of the US job market despite being hit by two hurricanes and the impact of the Boeing and dockworkers' strikes. This has raised the market's expectations of the Fed's 'pause in rate cuts' in November. However, some economists believe that the report is an outlier and will not be referenced by Fed officials at next week's monetary policy meeting. They are more focused on the non-farm employment report to be released on Friday by the US Bureau of Labor Statistics. The market estimates that the non-farm employment in October will increase by 100,000, with the unemployment rate remaining at 4.1%. Jeremy Siegel, a distinguished professor at the Wharton School of the University of Pennsylvania, said in an interview on Tuesday that if the October non-farm employment report released this Friday performs strongly, many Fed officials will inevitably consider pausing rate cuts next week. If the US bond yield rises above the 4.3% warning line, the future of the US stock market may be at risk. On the other hand, the trend of the 10-year US bond yield, known as the 'anchor of global asset pricing', has been rising since September, according to MarketWatch, rising to 4.3% on Wednesday, reaching the highest level since mid-July. Adam Turnquist, chief technical analyst at LPL Financial, warned that past experience indicates that once the yield continues to rise above 4.3%, the US stock market may face major trouble. He cited the example of the early September 2023, when stronger-than-expected service industry data increased the risk of inflation, leading to the 10-year yield rising above the 4.3% red line, becoming a turning point for the sharp decline in the US stock market the following month. On October 23, the yield briefly exceeded the 5% mark for the first time in 16 years, and on the same day, the S&P 500 index fell, setting the longest losing streak since 2023. Currently, the 10-year bond yield is steadily above the 200-day moving average of nearly 4.18%, indicating a tendency for further upward risk. Turnquist believes that the yield will continue to rise, 'perhaps we can return to the high of 4.7% in April, which will be our last line of defense before rising to 5%.' He emphasized that the key to the impact on the future of the US stock market is to observe how quickly the 10-year yield rises, and the absolute value of the yield is not significant. 'The yield has experienced very large fluctuations, and the biggest determinant of the stock market will be the rate of change.' However, he also mentioned that the continued strong signs of the US economy may help limit some downside risks of the stock market. Will the Fed pause rate cuts in November? It is worth noting that interest rate strategists at Deutsche Bank said this week, 'The rise in yields reflects a drop in economic recession risk, and due to very strong economic data, the Fed may slow down the pace of rate cuts.' The CME FedWatch tool shows that the market expects the Fed to cut interest rates by more than 96% at the November meeting. However, on Wednesday, many CEOs of US TradFi giants expressed doubts about the market's optimistic expectations, and were not optimistic about the Fed's consecutive rate cuts before the end of the year. According to CNBC, Larry Fink, CEO of BlackRock, said at the 'Future Investment Initiative' conference held in Saudi Arabia on Wednesday that he believes the Fed will not cut interest rates as expected by the market this year and expects only one rate cut by the end of the year, because the global underlying inflation levels are higher than at any other time. At the same conference, Ted Pick, CEO of Morgan Stanley, bluntly stated that the era of loose monetary policy and zero interest rates has come to an end, and 'future interest rates will be higher, which will bring challenges globally.' In a group meeting, including CEOs of Wall Street giants such as Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered Bank, and Credit Suisse, when asked if the Fed will cut rates twice before the end of the year, no one agreed.