Dow falls 150 points after strong July jobs report points to more aggressive Fed

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Market Expects Bigger Fed Rate Hike in September

July’s much stronger-than-expected jobs report took markets by surprise and prompted Fed watchers to raise expectations for rate hikes.

The economy added 528,000 jobs in July, more than double expectations. Fed funds futures for October now forecast a 72% chance of a 75 basis point hike in September, up from 18% on Thursday, according to Peter Boockvar, chief investment officer of Bleakley Advisory Group. (a basis point corresponds to 0.01 percentage point)

Boockvar said the market is also pricing in some of the rate cut it expects for next year, and June 2023 futures are 25 basis points higher, putting expectations for federal funds at 3.54%.

“That’s hot. For the Fed, that’s another 75 basis point hike,” said Diane Swonk, chief economist at KPMG. She said the September rate hike could be 75 basis points, not 50, based on the jobs report alone. “The Fed is facing strong demand in a constrained supply economy, and that demand extends to the workforce,” Swonk said.

—Patti Domm

Stocks down at market open

Shares fell at the opening bell on Friday after a better-than-expected jobs report. The Dow Jones Industrial Average fell 217 points or 0.66%. The S&P 500 slipped 0.96% and the Nasdaq Composite lost 1.36%.

—Carmen Reinicke

September 75bp hike almost a done deal, says Shah

July’s stronger-than-expected jobs report means the Federal Reserve is likely to raise interest rates by three-quarters of a percentage point at its next meeting, as opposed to the half-percentage-point hike expected by the markets, Seema Shah, chief global strategist at Principal Global Investors, said.

“Today’s number means a 75 basis point hike in September is almost a done deal. Not only is the labor market undoubtedly still tight, but wage growth is uncomfortably strong,” he said. wrote Shah in a Friday note. “The Fed has its work cut out to create enough slack that could ease price pressures.”

“All the jobs lost during the pandemic have now been recovered. But while this is good news, markets will take today’s number as a timely reminder that there are still plenty more Fed hikes to come. come,” she said. “Rates are over 4% – today’s figure should put any doubters to bed.”

—Carmen Reinicke

Cramer explains why stocks are reacting negatively to the jobs report

“That number is extraordinary. We’re a growing country. The rest of the world isn’t,” Jim Cramer said on CNBC’s “Squawk Box” after the strong report.

But Cramer cautioned about what that means for stock prices and explained why we’re seeing a negative reaction in futures.

“That means obviously when they (the Fed) come back, it’s going to stay hot, they’re still doing three-quarters,” Cramer said. “That’s not what we thought. Remember we kind of bought this market on the idea that it’s at 50 (basis points).”

After raising rates by 0.75 percentage points for the second straight time last week, the central bank will next meet to decide interest rates in September. Traders were hoping they would slow the pace to a half point rise at this meeting. The S&P 500 is up 8% in the past month through Thursday’s close.

—John Melloy

Stock futures tumble after better-than-expected jobs report

Stock futures fell on Friday after the July jobs report turned much stronger than expected, showing more jobs added, a lower unemployment rate and higher wage growth than expected by economists.

Dow futures slipped 231 points, or 0.71%. Futures linked to the S&P 500 fell 1.08% and Nasdaq futures lost 1.33%.

—Carmen Reinicke

July jobs report smashes expectations

The US economy added far more jobs than expected last month. On Friday, the US government said 528,000 jobs were added in July, easily beating a Dow Jones estimate of 258,000.

Admittedly, the average hourly wage rose 5.2% year over year, well above expectations. This could be perceived by the market as a sign that inflationary pressures remain strong.

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Fred Imbert

Elon Musk thinks we’ve passed peak inflation

Elon Musk said he thinks we are past peak inflation and forecast a mild 18-month recession ahead.

Musk’s comments came during Tesla’s 2022 shareholder meeting, held on August 4.

“We have a good idea of ​​how the prices of things change over time, because when you’re making millions of cars, you have to buy products months before they’re needed,” he said. .

—Carmen Reinicke

Amazon to buy iRobot for $1.7 billion

Amazon will acquire iRobot for $61.00 per share, the consumer robot company announced Friday. The all-cash transaction is valued at approximately $1.7 billion, including iRobot’s net debt.

iRobot shares were halted on the news. The sale price of $61 per share is a 22% premium to Thursday’s close of $49.99. Amazon’s stock rose about 0.2% in premarket trading.

—By Michelle Fox

DoorDash surges after record orders

A Doordash delivery man rides a bicycle in the rain during the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S. November 13, 2020.

Carlos Allegri | Reuters

DoorDash shares rose more than 10% in premarket trading on Friday after the company reported better-than-expected quarterly results after the market closed Thursday. The food delivery service said orders were up 23% from the last quarter of the year and revenue jumped 30%.

The company expects consumer spending to decline in the second half of the year, it said.

—Carmen Reinicke

Oil is poised for a heavy weekly loss

Oil prices were moderately lower in Friday morning trading on Wall Street and on track for steep weekly losses. Concerns about a slowdown in demand have driven prices down in recent sessions.

West Texas Intermediate crude futures, the US oil benchmark, are down 10.5% for the week, while international benchmark Brent crude lost 14.5%.

—Pippa Stevens

Bitcoin and Ether on track for worst week since July 1

Cryptocurrencies fell this week after a tough start to the month. Bitcoin and Ether are both down around 3% since the start of the week and on track to post their first negative week in five.

The performance would also be the worst weekly decline since July 1, when Bitcoin lost 8.71% and Ether lost 13%.

—Carmen Reinicke

Warner Bros dives

Leslie Grace attends the premiere of Warner Bros. of ‘The Suicide Squad’ at Landmark Westwood on August 02, 2021 in Los Angeles, California.

Axelle/bauer-griffin | Filmmagic | Getty Images

Stifel raises S&P 500 second-half target

Stifel’s Barry Bannister raised his S&P 500 target for the second half to 4,400 from 4,200, noting that he continues to favor cyclical growth stocks in sectors such as software and media.

Here are two reasons Bannister gave for his target:

  • The “1H22 S&P 500 selloff is still reversing.”
  • “The S&P 500 also discounts the negative S&P 500 EPS y/a in 2022, but we see 2022 EPS holding.”

Bannister’s new target implies a 6% upside from Thursday’s close.

Fred Imbert

European stocks stagnate ahead of US jobs report

European markets were flat on Friday morning as investors tracked corporate earnings and awaited the key US jobs report.

The pan-European Stoxx 600 was little changed in early trading. Autos gained 0.8% while insurance stocks fell 0.8%.

Earnings continue to drive individual stock prices in Europe. Allianz, Deutsche Post, the London Stock Exchange Group and WPP were among the companies that reported before the bell on Friday.

-Elliot Smith

Asian markets shake fears over military tensions around Taiwan

Asia-Pacific markets rose on Friday as investors dispelled fears over Chinese military exercises near Taiwan, which follow US House Speaker Nancy Pelosi’s visit to the autonomous island this week.

MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.74%. Mainland China’s Shanghai Composite gained 0.28% and Shenzhen Component rose 0.64%.

Taiwan’s Taiex jumped more than 2%, with chipmaker TSMC rising 2.8%.

Fewer jobs doesn’t mean a weaker economy, investor says

While Friday’s jobs report showed the US economy added fewer workers in July than the previous month, that’s not necessarily a sign of economic weakness, according to Brad McMillan, CIO of Commonwealth Financial Network.

“If we see a reduction in hiring, even to the expected number, it seems much more likely to be due to a shortage of workers, rather than a sudden labor demand shock,” McMillan said. in a note. “With high demand, what matters here is the availability of labor.”

—Yun Li

Some on Wall Street don’t think the comeback rally can last

The Fed’s commitment to bringing inflation down along with easing recession fears sparked a rally of relief in the market. The S&P 500 is now 14.2% above its 52-week intraday low of 3,636.87 since June 17. The benchmark also just had its best month since November 2020, gaining more than 9% in July.

However, some on Wall Street are skeptical that the rally will last much longer. Max Kettner, chief multi-asset strategist at HSBC bank, said the return was “wishful thinking” and he would need to see another revision to rate hike forecasts and another sharp drop in real yields to believe it.

Widely followed Morgan Stanley’s Mike Wilson also called the rally short-lived as corporate earnings begin to deteriorate.

Consumer Discretionary leads the gains, with Energy the biggest laggard this week so far

Six of the 11 S&P 500 sectors were in the green week so far, led by consumer discretionary, which gained 2.9%.

The most negative sector this week was energy, which fell more than 8% and is on track for its worst week since June 17. The drop in energy names came amid falling oil prices. WTI is down more than 10% this week, on pace with its worst week since April.

—Yun Li

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