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Stock Market Plunges with Slim Fed Rate Cut Chance After Optimistic Employment Report

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Following the official release of this month’s jobs report, the bullish stock market went down last week. As a result, the chances of a Federal Reserve cut on interests have narrowed.

 

From Bullish to Bearish in A Snap

 

Wall Street experienced a plunge in stocks despite the positive momentum last Friday. The Nasdaq Composite went down 0.1 percent to 8,161.79, Dow Jones Industrial Average fell by 232.67 points, and S&P by nearly 1 percent. The five-day streak of the stock market was cut short to four days as a result. Both S&P 500 and Dow Jones performed well by one percent, while Nasdaq gained about two percent last week. Majority of stocks illustrated productive results on Wednesday before the losses that followed the jobs report.

For the month of June, the jobs report data presented an additional 224,000 jobs or employment in the U.S. Amerivet Securities Head of U.S. rates Gregory Faranello said that “The jobs number was solid.” Faranello also emphasized what could be expected following the jobs report: “The real theme now will be shifting very quickly to what the number means in the context of what we’re pricing in for the Fed in July.” Bank shares of financial institutions including Wells Fargo, Bank of America, Citigroup, and J.P. Morgan Chase greatly benefitted from the high rates.

 

Fed Rates Won’t Succumb to Stock Market Lows

 

Exchange Bank of Canada Head of FX Strategy Erik Bregar expressed his thoughts on the market activity, “Markets never make it easy. We’ve had a rate-cut trade in place for a while now. That is to buy gold, buy bonds. But these things never go on a straight line.” Bregar further explains how little the optimistic jobs report would impact the Fed rate cut, “If you look at bond markets around the world, they’re worried about something. I don’t think central banks have the guts to go against the bond market.”

On the other hand, stock investors were looking forward to the Fed rate cut for the upcoming month prior to the release of the jobs report on Friday. The expectation rate for the July cut was 100 percent, according to FedWatch of CME Group. After the release of the jobs report, about 94 percent could roughly represent the chances of not experiencing a Fed rate cut. The Federal Reserve made it clear that it would “act as appropriate” in consideration for the economic expansion in the U.S.

Smith Capital Partners investor Lindsay Bernum commented that “We’re seeing a lot of repricing from the market,” and added, “I don’t think they have to bring 25 basis-point rate cut based on this report, but we still need to get through the data for the rest of the month.” Technology stock such as Broadcom and Micron Technology some felt pressure after Samsung cited low demand for memory chips. Both shares fell by 0.8 percent and 0.4 percent respectively.