THE US markets ended last week on a positive note despite being feeble throughout due to Middle East tensions and economic data uncertainties. Most of the recovery of the indices came late Friday after US jobs market data showed that the US may go into a “soft landing” versus a deep recession.
The Dow Jones Industrial Average ended at a record peak of 42,352.75 as investors saw the strong labour market as a sign that the Federal Reserve’s 50bps interest rate cut recently will unlikely push the economy into negative growth.
Treasury rates in the bond market jumped last Friday after the Bureau of Labour Statistics released a report showing the US economy added 254,000 jobs in September while the unemployment rate dipped to 4.1%.
Overall for the week, the US jobs report was incredibly strong on every front possible – job creation, unemployment, wages and hours worked. The rise in job openings – up by 329,000 to 8.04 million in August 2024 – indicates continued labour demand, but the decrease in job quits suggests growing caution among workers.
This labour market uncertainty aligns with the US central bank’s focus on addressing economic weakness, particularly as inflation cools. The recent rate cuts, including the expectation of further reductions, are likely aimed at supporting labour market resilience and stimulating growth in sectors showing demand, such as construction. While the inflation backdrop is allowing the Fed to start moving monetary policy back to neutral, we think it will be in 25bp increments at the end of the year not the 50bps we saw in September.
