US Stocks Rise 3.69% as Technology Jumps 7.30% and Treasury Yields Fall

Q: Will the sudden drop in July payrolls finally force the Federal Reserve to abandon its September rate hike?

Probably not by itself, but it makes a September hike much less likely. The July jobs report was weak enough to sharply change market expectations. Nonfarm payrolls fell by 23,000 instead of rising by about 80,000, prior months were revised lower, wage growth slowed to 3.2% year over year, and labor-force participation dropped to 61.4%. That combination suggests labor demand is cooling and reduces the immediate case for tighter policy. Futures markets quickly cut the implied odds of a September hike from roughly even-or-better odds before the report to around 20% to 40%, depending on the measure. Still, one payroll report is unlikely to “force” the Federal Reserve to abandon a hike outright. The Fed has repeatedly said policy depends on incoming data, and its June minutes showed officials were still more worried about inflation than employment weakness. Inflation remains above the 2% target, and some policymakers had recently argued for higher rates, partly because of energy-price risks tied to the Middle East conflict. The key swing factor now is inflation data, especially the July CPI due next week. If inflation also cools, the weak jobs report will strengthen the case for holding rates steady in September. If inflation surprises on the upside, a hike could remain on the table despite softer payrolls. So the labor report likely eases pressure for a September move and shifts the Fed toward waiting, but it does not settle the decision on its own.

3 articles · Updated · Morningstar · Aug 7

The Morningstar US Total Market Index climbed 3.69% for the week ended Aug. 7, with 69% of 883 covered US-listed companies advancing.
Technology led sector gains with a 7.30% jump, followed by basic materials up 6.33%, while energy lagged with a 3.44% drop and utilities fell 1.33%.
Growth shares outperformed value—up 5.05% versus 2.02%—as the S&P 500 gained 3.58%, the Nasdaq rose 5.19%, and small-caps edged large-caps with a 3.71% advance.
Treasury yields eased alongside the rally, with the 10-year falling to 4.65% from 4.75% and the 2-year to 4.19% from 4.28%.
Commodity moves underscored the week’s crosscurrents: WTI crude slid 11.22% to $77.06 a barrel, while Comex gold rose 7.33% to $4,346.40.