The latest jobs report didn’t give the stock market any easy answers.
The Nasdaq Composite fell 1%, while the S&P 500 was down 0.4% as Wall Street digested the latest employment report. The Dow was up 122 points, or 0.3%, pulling back a bit from where it jumped shortly after the start of the session.
Not even the bond market knows exactly how to react to these numbers. The yield curve, which normalized earlier this morning, was inverted again as the morning rolled on. The 2-year Treasury yield was up to 3.77%, while the 10-year yield was up to 3.762%. Bond yields initially fell in the wake of the report.
Wall Street is trying to make sense of the August employment report, which came in weaker than expected but not so much so that it ignited further recession fears. What impact it could have on the Federal Open Market Committee’s September rate cut decision is still up for debate.
The odds of a quarter-point rate cut were down to 53% from 60% on Thursday, according to the CME FedWatch Tool. Odds of a half-point cut briefly spiked to 59% this morning but were back down to 47% in recent trading.
“Today’s payroll report confirms that the labor market is slowing but not drastically,” Cetera CIO Gene Goldman told Barron’s. “Overall it confirms the economy is not falling into a recession, but instead a goldilocks/market friendly soft landing is likely.”
Goldman argues the report gives ammunition for the Fed to start cutting rates this month, though he doesn’t believe there’s been enough negative data to prompt a half-point cut. Goldman notes the market has already been pricing in cuts from the Fed, so the stock market’s reaction today could be mixed.
He thinks underperforming parts of the market like industrials and financials can outperform growth sectors like consumer discretionary technology as the market’s rally widens in the anticipation of cuts.
That could explain why the Nasdaq is struggling so much, especially compared to the Dow. For the S&P, roughly 350 of its members were rising on the day. Technology and real estate were its only major sectors that were down.