Strong Economic Data Lowers Wall Street’s Rate Cut Expectations: Robust job numbers have caused a decline
in Wall Street’s confidence that the Federal Reserve’s next interest rate cut will be significant.
U.S. companies added more jobs than expected in September, prompting varied market reactions.
Contents
Rising Bond Yields and Steady Stocks
Yields on 10-year Treasury bonds rose to 3.8%, up from 3.69% in the previous session.
Meanwhile, the S&P 500 index remained steady, while the Nasdaq 100 index gained 0.1%.
This performance followed a rise in the U.S. dollar driven by stronger-than-expected job figures.
Surprise Job Numbers
Data released on Wednesday showed that U.S. companies added more jobs than expected last month,
contradicting other indicators suggesting a slowdown in the labor market.
Investors are now awaiting Friday’s nonfarm payroll report to assess the health of the U.S. economy.
Expert Commentary
Chris Larkin of E*Trade noted that the ADP job report exceeded expectations,
indicating that while the labor market is slowing, it is not collapsing.
He added that Friday’s report will be crucial in shaping near-term market sentiment.
Rate Cut Options
Bank of America strategists, led by Meghan Swiber, believe that a half-point rate cut is still an option,
even with a strong labor market.
On the other hand, Marc Rowan, CEO of Apollo Global Management,
warned that the Federal Reserve’s aggressive monetary easing could overstimulate the economy,
especially with rising real estate prices.
Diverging Views
Richmond Federal Reserve President Thomas Barkin took a different view,
stating that it is too early to declare victory over inflation,
emphasizing the ongoing uncertainties regarding inflation and employment.
Geopolitical Tensions and Market Impact
Regarding tensions in the Middle East, investors are hopeful that the situation will de-escalate,
as it did in April, despite Israel’s vow to retaliate against missile attacks from Iran.
Meanwhile, early gains in oil were erased due to an unexpected rise in U.S. inventories,
with West Texas Intermediate crude trading at around $71 per barrel.
Uncertainty Concerns
Anna Rosenberg of Amundi Asset Management highlighted the significant uncertainty
in the markets but added that expectations remain that the tensions will not escalate into a full-scale war.
Stock Market Outlook
For stock investors, keeping oil prices below $100 per barrel
and maintaining solid corporate earnings are critical drivers of stock market growth.
Mary Ann Bartels of Sanctuary Wealth expects the S&P 500 to reach 6,000 points
by year-end if interest rates decline and consumer spending remains strong.
Corporate News
In corporate news, Humana’s shares dropped after a decline in Medicare quality ratings,
while Nike’s stock also fell after the company withdrew its full-year sales guidance.
Tesla’s shares declined by 3.5% following disappointing quarterly vehicle sales.
Asian Markets
Chinese stocks listed in Hong Kong saw their largest rise in nearly two years
after Beijing eased home purchase regulations.
This was part of a massive stimulus effort announced last week by Chinese leaders,
which boosted local and international markets.
Strong Economic Data Lowers Wall Street’s Rate Cut Expectations