3 weeks ago
Stocks Poised for Best Week Since April as Payrolls Fall
Imagine the economy as a big weather system.
Last month, jobs in the United States went down by 23,000, which surprised grown-ups who expected many more jobs.
The people in charge of money, called the Federal Reserve, watch these job numbers closely.
Many watchers now think the Fed is less likely to raise interest rates in September.
Because of that news, the stock market had its best week since April.
Stocks are tiny pieces of companies that people can buy and sell.
Many companies announced they made more money than people expected, which made investors very happy.
Some companies like Atlassian and Airbnb went up a lot, while The Trade Desk went down.
In the end, the market finished the week on a happy note.
July nonfarm payrolls unexpectedly fell by 23,000 jobs, versus a Reuters-polled estimate of an 80,000 increase.
The unemployment rate dipped to 4.1% from 4.2% in June as workers left the labor force.
Market odds of a Federal Reserve rate hike in September dropped to 44.1%, down from 55% the prior session.
All three major indexes were on track for their biggest weekly gains since mid-April, with the Dow and S&P 500 hitting record highs.
Among movers, SpaceX jumped 11.9%, Atlassian rose 37.4%, and Airbnb gained 15.7%, while The Trade Desk fell 21.3%.
- Who
- U.S. stock investors, the Federal Reserve under new Chair Kevin Warsh, and companies including SpaceX, Atlassian, Airbnb, Microchip Technology, and The Trade Desk.
- What
- All three major U.S. indexes closed higher and were set for their best week since mid-April after July payrolls unexpectedly fell, easing September rate-hike expectations.
- Where
- New York, United States.
- When
- Friday, August 7, capping the trading week following the July jobs report.
- Why
- Weak job data lowered Fed rate-hike odds to 44.1%, a strong earnings season lifted sentiment, and Iran peace-deal progress cooled oil prices.
Market Optimists
Market Skeptics
Fed policy direction
Market Optimists
Weak job growth means the Fed probably needs to lower rates to stimulate job creation.
Market Skeptics
Lowering rates would also stimulate inflation, and weak jobs combined with high inflation could warrant higher rates instead.
The stock rally
Market Optimists
Record highs are justified because corporate earnings have been stellar, with 85.1% of S&P 500 companies beating expectations.
Market Skeptics
The market should be reacting to weak job numbers, higher inflation, and the possibility of a slow-growth economy that may need rate rises, so the rally doesn't add up.
Key facts
- July nonfarm payrolls
- -23,000 jobs vs. +80,000 expected
- Unemployment rate
- 4.1%, down from 4.2% in June
- September rate-hike odds
- 44.1% (CME FedWatch), down from 55%
- Dow Jones Industrial Average
- +72.70 points (+0.13%) to 53,957.80
- S&P 500
- +34.08 points (+0.44%) to 7,744.09
- Nasdaq Composite
- +254.48 points (+0.97%) to 26,602.84
- Earnings beat rate
- 85.1% of 436 reporting S&P 500 companies (LSEG)
- Notable movers
- Atlassian +37.4%, SpaceX +11.9%, Airbnb +15.7%; Trade Desk -21.3%
Quotes
Tom Siomades
Chief market economist at AE Wealth Management in Topeka, Kansas
“"You probably have to lower rates to kind of stimulate job growth, but if you lower rates, you’re going to also stimulate inflation. So you’re kind of in a pickle at this point, and yet the market’s just taken off because earnings have been stellar."”
livemint.com
Sources
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