Friday’s blockbuster Job’s report did everything but move the indexes. The Labor Department’s release of an overwhelming number, 162,000 new jobs added even stunned economists in general, who had estimated 53,000 jobs to be the number. The unemployment rate remained steady at 4.1%, a good barometer that the economy is “healthy and headed in the right direction,” according to The Wall Street Journal. “We don’t have a problem in the labor market,” said Joe Brusuelas, chief economist at RSM. After cooling in June and July, robust hiring in August has reversed the trend. The Labor Department’s Inflation Report due out Friday will hopefully give a good indication of the economy’s balance. Early prognoses by market watchers look for expectations inflation will show little change. EY Parthenon, chief economist at Gregory Daco said: “We expect to see consumer spending to be capped over the coming months.” [referring to the pressures on the consumer] Stocks weren’t the only sector to fall after the hiring report as the 2-year Treasury note yield hit 4.379% up from Thursday’s 4.332%. The Dow Jones Industrial Average dropped 272 points, while the S&P 500 and Nasdaq fell 0.4% and 0.3% respectively. Chipmakers were strong with AI and software stocks weaker. Gasoline edged up to a nationwide average of $4.15, most certainly on a march higher as oil is skyrocketing.
Will September, historically the worst performing month of the year, continue the trend this year? “The Dow Jones Industrial Average has slid an average of 1.1% in the ninth month of the year, in data that date to the19th century.” Lingering challenges are taking a toll on the markets: The stubborn Middle East War, climbing consumer prices and a possible September 16 rate hike are bearing heavily on the market. Investors and traders are rotating into less volatile sectors as noted by heavier volumes and activity in the The Dow Jones Industrial Average and the smaller value company Russell 2000 index. Yet there are also many reasons to be optimistic as the bull market surges ahead; consistently higher earnings by market leaders, the strong labor market and an economy that is buzzing. Even the AI sector with its costly buildout and unproven earnings capabilities is proving to be ‘more realistic’ growthwise. “Rates have really been driving the car for equities the last few weeks,” said Ross Mayfield, an investment strategist at Baird. He adds: “There are more anxieties or uncertainties about the backdrop.” [He questions the fundamentals that would bolster a bull market into 2027.] Tuesday’s Dow Jones Industrial Average dropped 628 points dragged down in part by Amgen’s 10% drop. The “biotechnology company’s competitor failed a heart–diease drug clinical trial.”
Oil surged past $100.00 a barrel Wednesday as the Middle East War escalates with Iran attacking U.S. warships and with the U.S. retaliating. Indexes struggled for the 4th day in a row while bond yields jumped higher. The 10–year Treasury note topped 4.805% – the highest since 2023–showing no signs of abating. Jose Torres, senior economist at Interactive Brokers’ timely quote; “Progress on inflation is poised to reverse if geopolitical tensions don’t simmer.” Again Thursday oil surged up to $103.88 a barrel, locking down the markets, with all three indexes faltering. According to CME FedWatch, chances for a Federal Reserve rate hike are above 70%.
RUMBLINGS ON THE STREET
Ben Kizemchuk, A Toronto portfolio manager at WEllingto–Altue Private Wealth, WSJ – “It’s more like a global repricing of sovereign debt. Markets are beginning to price in a world where economies are converging.” He adds, “Japanese yields are coming into greater alignment with those in the U.S. and Europe.”
Seema Shah, Chief Global strategist at Principal Asset Management, Barron’s – “Rising bond yields in the wake of softening jobs and real and housing data suggest investors are moving from an inflation story, controlled in part by the Fed, to a ‘term premium story,’ implying risks that are beyond the central bank.” [Quoted before Jobs Report]
Keith Lerner, chief investment advisor for Truist Advisory Services, WSJ – “You’re moving from this earnings–driven market to this macro–driven market with the Fed, inflation and interest rates in focus. It tends to be a choppier period.”
