U.S. stocks climbed and bond yields declined after a weak jobs report sparked rate-cut expectations, reinforcing hopes that the Federal Reserve may move to ease monetary policy soon. The softer-than-expected labor data boosted investor confidence, as markets increasingly anticipate interest rate cuts. Major indexes gained momentum while Treasury yields fell, signaling that traders are betting on policy adjustments in response to slowing job growth.
Labor Market Slows Sharply
The U.S. added just 22,000 jobs in August, far below forecasts of 75,000 and down from 79,000 in July. Meanwhile, the unemployment rate climbed to 4.3%, the highest level since 2021.
Wage growth also cooled, with average hourly earnings rising only 0.1% month-over-month, compared with 0.3% in July. On an annual basis, wages grew 3.5%, marking the slowest pace in nearly two years. Slower wage growth often signals easing inflation pressure, which could strengthen the case for monetary policy adjustments.
Market Reaction: Stocks Gain, Yields Drop
Stocks rallied on these results: futures tied to the S&P 500 and Nasdaq both posted gains, while the Dow saw modest increases. On the fixed-income side, yields on U.S. Treasury bonds fell as markets priced in stronger odds of a Fed interest rate cut.
Fed Policy Outlook Shifts
The weak jobs data has shifted expectations for the Federal Reserve’s next move. Historically, rate cuts follow signs of slowing labor markets. Analysts now see a high chance of a 0.25% reduction in September, with room for further cuts depending on upcoming data.
Investor Betting Heats Up
Markets appear priced for easier policy. Equities rose across sectors, especially in rate-sensitive industries like tech and housing. The futures market suggests nearly a 97% likelihood of action from the Fed at its mid-September meeting.
Conclusion
Weak job creation and rising unemployment are strong catalysts for rate easing. As investors react positively, bond yields slide, and equities advance. All eyes now turn to the Fed’s next move, and many expect action based on the growing case for a rate cut.
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