A recent jobs report showed a significant shortfall in employment growth, causing the stock market to rise in premarket trading. The report indicated that headline nonfarm payrolls increased by only 29,000, falling far short of the 84,000 consensus estimate. Private nonfarm payrolls also missed expectations, coming in at 46,000 versus a projected 100,000. Additionally, average hourly earnings rose by 0.1%, which the author notes is below the inflation rate, suggesting a decline in consumer purchasing power.
The author attributes the market's rally to the expectation that the Federal Reserve will not raise interest rates at its upcoming October meeting. The probability of a rate hike in October is estimated to be less than 5%, with Fed fund futures indicating a 16% chance. The article suggests that the Fed is unlikely to act before midterm elections to avoid conflict with the President.
Separately, geopolitical developments are impacting the oil market. France has proposed to the European Union to release 50 million barrels of diesel and 50 million barrels of oil from strategic reserves. This proposal follows a request from President Trump for President Macron to release 100 million barrels of diesel. In response to these supply proposals, Saudi Arabia has increased the flow through its East-West pipeline to 80% of capacity. These factors have led to a decline in oil prices.
The article notes that money flows are positive in the "Magnificent Seven" stocks—Apple, Amazon, Alphabet, Meta, Microsoft, NVIDIA, and Tesla—as well as in the S&P 500 ETF (SPY) and the Invesco QQQ Trust. The author also highlights that Bitcoin is seeing buying activity.
