US Futures Now: Here’s why the market is trading lower after strong jobs data

Chair Jerome Powell last week held open the possibility that officials could raise rates by 75 basis points for a third time at their next meeting in September.

US Futures Now: Here’s why the market is trading lower after strong jobs data
Nonfarm payrolls jobs increased by 528,000 in July, nearly double the 258,000 projected by economists.

US jobs data, from Labour Department, shows a more than robust employment sector. Employment is on a high with more employers giving jobs to Americans. The strength in jobs data will propel Fed to be aggressive to tame inflation by hiking rates. The recessionary fears may also subside unless other factors are also considered.

Nonfarm payrolls jobs increased by 528,000 in July, nearly double the 258,000 projected by economists. Till now, this week, investors were looking at corporate earnings and taking positions in the market. Now, the investors will take into the jobs data for the next round of Fed action in the weeks ahead.

Employment in the prior month was revised up to a 398,000 gain. The unemployment rate fell to 3.5%, matching a five-decade low. Wage growth accelerated and the labor force participation rate eased.

US futures have taken a dive and leading indices are in red. Dow 30, S&P 500 and Nasdaq Composite are lower by 0.64 per cent, 0.98 per cent and 1.43 per cent before market opening. The Wall Street gains of the previous few weeks look to be threatened with indices falling more from the current levels.

Chair Jerome Powell last week held open the possibility that officials could raise rates by 75 basis points for a third time at their next meeting in September, depending on inflation and economic data between now and then.

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The stock market recovery from the lows of June 2022 has been impressive so far. After a spectacular performance in July, the US stocks are now looking to slide further down.

US fed is on a mission to control inflation by hiking rates. In 2022 so far the rates have been hiked by 2.25 per cent. With rising rates, comes the risk of the economy slowing down as the recessionary fears are already underway. Investors are expecting that amidst recessionary risk, the US Fed may not be as aggressive to tame inflation as it would have been in a growing economy. This probably spurred a July rebound in stocks.

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Now, after strong jobs data, Fed may continue hiking rates till inflation is under control. Till the time the inflation data shows a cool-off, the risk of the markets sliding down exists.

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