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S&P 500 recovers as markets digest soft US jobs data, pause in Fed rate hike

by SuperiorInvest


  • The S&P 500 ended the week up 0.9%, with the Nasdaq and Dow Jones also posting strong gains, reflecting a positive shift in investor sentiment.
  • US labor market data showing a slowdown in job growth fueled speculation that the Federal Reserve may hold off on raising rates.
  • Fed officials Thomas Barkin and Neil Kashkari emphasized the uncertainty about the future development of interest rates and stressed the need to remain data-driven.

Wall Street ended the week with gains on Friday after a turbulent week that saw the U.S. Federal Reserve’s (Fed) decision to keep rates on hold while Fed price traders completed a tightening cycle. As a result, U.S. stocks rose, the dollar fell, and U.S. bond yields plunged.

S&P 500 closes volatile week with gains as investors adjust to prospect of pause in Fed tightening cycle

The US stock benchmark, the S&P 500, gained 0.9% to end at 4,356.34, posting a 5.9% weekly gain. The Nasdaq Composite jumped 1.4% to end at 13,478.28 and the Dow Jones Industrial gained 200 points, or 0.66%, to hold above the 34,000 mark.

Macroeconomic data from the US revealed that the labor market is cooling, prompting speculation that Fed chief Jerome Powell and Co. will not raise rates. October Nonfarm Payrolls rose by 150,000, below expectations of 180,000 and trailing the previous month’s 290,000. Looking deeper into the U.S. Labor Department report, the unemployment rate climbed to 3.9%, while average hourly earnings fell to 4.1 of 4.3%.

Later, S&P Global and the Institute of Supply Management (ISM) revealed that business activity in the services segment is slowing, as shown by October data. Given that situation, money market futures traders downgraded the odds of further Fed tightening and instead raised the odds of a 100 bps rate cut next year, according to data from the CME FedWatch Tool.

In terms of sectors, the gainers were real estate, materials and communication services, each adding 2.35%, 1.55% and 1.39%. The only loser was Energy, 1.01% below its opening price, weighed down by the decline Oil pricesas the conflict in the Middle East dragged on for a fourth straight week.

On Friday, the dollar lost more than 1%, as US dollar index (DXY) ended on a brisk handle of 104.00, around 105.06. U.S. Treasury yields fell, with the 10-year U.S. Treasury yield down eight basis points to 4.57%.

Meanwhile, Federal Reserve officials, led by Richmond Fed President Thomas Barkin, went beyond the coverage. He said there were risks of too much and too little tightening, and mentioned that he wasn’t sure if the Fed had reached maximum rates. Meanwhile, Minnesota Fed President Neil Kashkari said he needed to continue watching the data, adding that it was “too early to call” if another rate hike was needed.

Next week, US Economic Paper will feature Fed speakers led by the chairman Jerome Powell, Lisa Cook, Christopher Waller, Philip Jefferson and some regional Fed bank presidents. In terms of data, the primary data points to be released are Initial Jobless Claims and University of Michigan (UoM) consumer sentiment.

S&P 500 Price Chart – Daily

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