Schwab's Kathy Jones: Stock Market Getting Yippy

Kathy Jones, Chief Fixed Income Strategist at the Schwab Center for Financial Research, joins Bloomberg Businessweek Daily from the Schwab IMPACT 2025 conference. She discusses the state of fixed income as the equity market contends with a bout of volatility. Jones says there's a floor on yields "absent a very big change in the economic outlook." She also discusses the Federal Reserve's path forward, including why she thinks the market is "over its skis" by expecting more rate cuts. She speaks with Carol Massar and Tim Stenovec.

Strong evidence of a cooling US labor market rippled through Wall Street, spurring a rally in bonds as traders boosted their bets the Federal Reserve will cut interest rates in December. The dollar fell. Stocks wavered.

With the scarcity of data caused by the federal shutdown, investors have turned to private readings such as the Challenger, Gray & Christmas Inc. report showing companies announced the most job cuts for any October in over 20 years. Following the numbers, money markets now imply a 60% chance of a quarter-point rate reduction next month.

“We are sticking to our view that the Fed will deliver a follow-up 25 basis-point cut in December because restrictive Fed policy can worsen the already fragile employment backdrop and upside risk to inflation are not materializing,” said Elias Haddad at Brown Brothers Harriman & Co.

Traders are also keeping a close eye on a slate of central bank officials slated to speak on Thursday. Fed Bank of Chicago President Austan Goolsbee told CNBC that a lack of inflation data during the government shutdown makes him more uneasy about continuing interest-rate cuts.

Policymakers last month lowered interest rates for a second straight meeting in an effort to bolster the labor market following a sharp slowdown in hiring over the summer. But inflation, which at 3% in September remained well above the Fed’s 2% target, has also raised concerns among some officials that it will take longer to come down than they thought.

S&P 500 futures were little changed. The yield on 10-year Treasuries slid five basis points to 4.10%. A dollar gauge fell 0.2%.

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