Are US investors confused, or so besotted with the idea of falling interest rates that they ignored the strongest single month's jobs figures for a year, and ended four losing sessions to charge higher on Friday?
That question comes to mind after the positive reaction to what was a strong jobs report for March—one so solid that it would normally be a bit of a sentiment crusher and trigger fears about the future of rate cuts.
But the story of three Fed rate cuts, with the first one in June, kept its grip on market sentiment. Even though in different circumstances, the strength of the jobs report would have been enough to raise questions about the need for a rate rise. But investors ignored the 303,000 new jobs, slowing wages, a drop in the jobless rate to 3.8%, and the Dow recovered well from its worst session in more than a year on Thursday.
Certainly, the next test is the US consumer price inflation figures on Wednesday. After dropping more than 530 points on Thursday, the Dow regained most of that with a rise of 307.06 points, or 0.8%, to end the week at 38,904.04.
The S&P 500 jumped 1.1% to 5,204.34, and the tech-heavy Nasdaq added 1.24%, closing at 16,248.52.
Despite the bounce, all three indexes posted a losing week. The Dow slid 2.27%, posting its worst weekly performance in 2024. The S&P 500 lost 0.95%, while the Nasdaq slipped 0.8%.
According to CNBC, investors are torn between wanting a strong economy to support further corporate earnings growth and wanting a weaker jobs market that will give the Federal Reserve the green light to begin cutting interest rates.
“Markets are understandably confused, but the underlying economic circumstances which are the actual data series being released, like the jobs report, just continue to affirm two things: strong employment growth … and that the economy is not anywhere near recession,” said Jamie Cox, managing partner of Harris Financial Group.
“At the end of the quarter, markets ran up a lot more than they should have, so there was going to be some selling pressure regardless this week,” he continued, adding that this week’s sell-off was accelerated by fears of escalation in the Middle East and inconsistent speeches from various Fed speakers.
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Whatever Wall Street thinks, the solid performance Friday dragged the ASX share price index futures higher on Friday night to the point where the market looks like opening with a near 40-point gain later this morning.
That was after Australian shares ended last week weak in the wake of Thursday’s sell-off on Wall Street.
That saw the ASX200 slip 0.6% to 7773.3 at the close.
That saw the benchmark down 1.6% over the shortened trading week.
The Australian dollar lost 0.2 percent of its value against the greenback to trade at US65.74c.
