Editor
Wall Street wavers after a strong July jobs report.
After the US Bureau of Statistics released July job reports on Friday morning, Wall Street gained some traction. The S&P 500, Nasdaq, and Dow have all lost ground in the last three days as tensions between China and the United States have risen. The visit to Taiwan by the U.S. House Speaker has affected this week’s gains. Today the Bureau of Statistics posted the July job report, which was better than expected by double the forecasted number.
The S&P 500 erased some of today’s losses and jumped from a 1% decline to a 0.16% decline by the end of evening trading hours. Tech stocks and the heavy nasadq index slumped by 0.50%. The Dow Jones average wavered and jumped from a losing position to a positive posting to settle at an increase of 0.23%.
In July, the Bureau of Labor Statistics posted 528,002 new jobs, which is more than the expected number. Experts predict that the U.S. will only provide 258,000 new jobs in July. This number will erase any concerns about an economic slowdown or a short-term recession, experts say.
Today’s report noted that the growth was widespread and massive, beating all forecasts and challenges. Leisure and hospitality were among the high takers. The continued growth in food services was a factor in the leisure and hospitality sectors. The sector added 96, 000 new jobs. As for professional and business services, the sectors are on a continued and improving pattern. In July, professional and business services added 89,000 new jobs.
Healthcare also saw a 70.000 increase in its non-payroll number, which supports the fact that the government is focusing on improving its healthcare system.
The increase in the total nonfarm payrolls is not the only positive number in this report. The unemployment rate fell to 3.5%, which is the lowest percentage since February 2020. The decline in the unemployment rate will erase investors’ concerns about the impact of interest rate hikes on the labor market. The all-time 40-year inflation rate remains a big challenge to the White House and the Federal Reserve officials. The unemployment rate has returned to its pre-pandemic level, and that could push the FED to ease its monetary policy.
As you know the FED has increased its interest rates 4 times by the first half of 2022, by a total increase of 225bp. There will be at least 3-4 additional interest hikes. But according to the latest data, it might lift its interest rates by 50bp.
Yet, in terms of the market’s future outlook, things are still uncertain, the market still holds a big risk due to the geopolitical tensions. On the other hand, the market can’t take more hawkish interest hikes by the FED. For one reason only, the market simply can’t take any negative impacts.
According to Jefferies, the strong labor market isn’t enough to shrink inflation and decrease it to 3.6%. This theory makes it hard to believe that the Federal Reserve will start easing its Monterey policy. There will be more aggressive hikes at least at a rate of 50-75bp.
