Concern about interest rates leads to negative results
US jobs data slightly slows down Wall Street
07/08/2023 12:19 am
During the day, Wall Street looks good, at times it’s even up. However, the uncertainties surrounding interest rates ultimately caused the US stock market to slip into the red. A weak US dollar is also driving up oil prices.
After the US jobs data for June, Wall Street eased on Friday. However, the indices only turned negative in the last few minutes of trading, after showing solid premiums of around half a percent in the meantime. What happened was characterized by caution and uncertainty because the actors had difficulty interpreting the new data.
On the one hand, they dampened concerns about further increases or prolonged high interest rates, which had been fueled by extremely strong employment data from the US private sector on Thursday. On the other hand, they did not change the expectation that the US Federal Reserve could raise interest rates on July 26th.
The Dow Jones Index closed 0.6 percent lower at 33,735 points. The wider ones S&P 500 and the Nasdaq indices fell by up to 0.3 percent. According to initial information, there was nyse 2,137 (Thursday: 398) gainers, 804 (2,581) losers and 89 (45) unchanged shares.
In June, job growth not only slowed down more than expected, but at the same time the data on newly created jobs in the two previous months was revised significantly downwards. The 209,000 jobs added were also the fewest in more than two and a half years, which may indicate that the US Federal Reserve’s rate hikes are having an impact. However, as expected, the unemployment rate fell slightly to 3.6 percent, and wages increased by 4.4 percent over the year, slightly more than in the previous month, which tends to indicate that the labor market will continue to be tight.
“That’s too much and it’s inconsistent with the 2 percent inflation target and suggests the labor market needs a further cooldown,” commented Andrew Hunter of Capital Economics. “The stock market is in a tricky situation,” said Seb Vismara, economist at BNY Mellon Investment Management. “Risks remain on the upside in terms of interest rates.” The US economy remains “too strong” for core inflation to fall back to 2 percent quickly, putting pressure on the Fed to hike rates further this year and possibly keep them higher for longer than expected, he said.
Dollar is weakening
At the bond market Yields increased moderately for the most part, after initially falling somewhat. The day before they had risen very sharply. At the short end, however, market interest rates fell. Apparently, the bond market interpreted the labor market data in such a way that the end of the interest rate hikes should be in sight.
In line with this reading, it went on foreign exchange market down significantly for the dollar. The euro last traded at $1.0968 compared to a daily low of 1.0870. The dollar index fell correspondingly significantly by 0.8 percent. The yen appreciated from 144 to 142.25 per dollar.
The stock market plummeted Levi Strauss by 7.7 percent. The jeans manufacturer had presented mixed quarterly figures and lowered its annual forecast. At the wholesaler Costco (-2.3%) disappointing sales in June.
biogenic were down 3.5 percent despite FDA approval of the Alzheimer’s drug Leqembi. The market launch of the drug is likely to be slow, analysts warned. They referred to logistics and infrastructure bottlenecks, especially since the drug had to be administered regularly via infusions.
oil prices rise
It went further dynamically upwards Rivian. The price of the electric car manufacturer has risen for the eighth trading day in a row, this time by 14.2 percent and in the past eight trading days by a total of over 80 percent. The recently reported unexpectedly strong deliveries in the second quarter are also contributing to the Rivian bull market.
Tesla (-0.8%) fell slightly. The company has joined 15 Chinese automakers in a commitment to end the electric vehicle price war.
First Solar improved by 3.3 percent. The company has negotiated a $1 billion line of credit to fund new factories.
The oil prices rose sharply by as much as 2.6 percent to the area of five-month highs. The main driver was the weak dollar, which made oil cheaper for buyers from the non-dollar area.