Stock futures (YM=F, ES=F, NQ=F) are under pressure as market participants digest the latest US jobs report, which delivered hotter-than-expected growth. The economy added 272,000 jobs in May, surpassing analyst projections of 180,000. This robust job growth has dampened investor hopes for a Federal Reserve interest rate cut.
Yahoo Finance’s Josh Schafer breaks down the market and analyst reactions to the print.
For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Angel Smith
Video Transcript
Futures are slipping right now after the US added 272,000 jobs during the month of May, that is more than the 180,000 that was anticipated.
Why are the markets upset?
You may ask yourself, Yahoo Finance’s Josh Schafer is here with more.
Josh, why so sad?
Well, this is not the soft economic data.
We’re gonna get a rate code in September print that we had been following for the last month, right?
If you look at sort of what the markets had started to shift and price in over the last month, it had really been a shift to softer economic data is good because it means we’re gonna get fed rate cuts.
You’re looking at the numbers on your screen right now.
272,000 job additions compared to estimates of 180,000, you also have average hourly earnings.
We know that sort of factored into potential inflation risk increasing, that had been decreasing, that was down last month.
So you have some concerns here when it comes to what it means for the fed.
And then I think when you take a look at the market Brad and sort of what’s moving the most right now its future to the Russell 2000.
Right.
We talk about this all the time.
Small caps are sort of what to look at when you’re wondering how markets are thinking about fed rate cuts in the 10 year up about 12 basis points.
The last time I looked, people were pricing out that September cut.
And so the riskier areas of the market, like small caps are getting hit.
Yes, exactly.
And we were just talking to Robert Slain of cities, global economist there and asking him just about what essentially this means for the timing of a rate cut.
And also just the position that this leads the fed in right now.
And they’re walking, what is a very narrow, they’re walking t road, right?
Because they at one point they cannot cut.
Because when you take a look at that wage growth number, when you take a look at the fact that the jobs market remains very tight that there had been signs of cooling ahead of this print, they’re not in a position to cut.
You don’t think a July cut obviously is still on the table.
And then on the flip side, the risk then of holding rates at these elevated levels for too long.
And ultimately, the damage that that could essentially in the end cause the economy to this point.
It feels like the fed has talked a lot about the strength of the labor market being a reason they can hold on.
Right.
And it feels like that this report certainly feeds into that narrative.
Right.
Which is ok, we can hold higher for longer because the job market is still in good shape.
Yes, you had the unemployment rate tick up a little bit.
And that will be interesting to follow going in next month.
Right.
Do we continue to see an increase there?
I think will matter a lot.
But yeah, Sean, I think overall you had a lot of people when we were talking about the soft data over the last week, Bank of America’s Michael Hartnett strategist this morning saying you don’t want too much soft data.
That’s not a, that’s not a good thing, right?
That’s a risk.
And I think that’s always important to remember when the market falls on a hot jobs report.
Maybe it’s still, there’s, there’s something good in the fact that America is adding jobs and the economy is doing well.
Yes, it might mean that your fed rate cut gets pushed out.
But we’ve been talking to strategists for months that say that this market might not need rate cuts at all this year just to add one other number on this because I hadn’t refreshed my screen from yesterday and the CME fed watch tool projections for September, I a lot of tabs.
That’s my issue.
We don’t have to air that out here or just.
But anyway, now sitting at about 51.6%.
So considerable move lower here this morning, off the back of it.
I think it was at 69% yesterday.
Really?
69% at one point.
Pretty big move from in one day.
All right, Josh Shafer.
Great stuff.
Thanks.