Dow Plunges After Fireworks as June Jobs Report Strangles Fed Outlook

July 5, 2019 09:49 UTC

The Dow and broader U.S. stock market opened sharply lower Friday after a stronger-than-expected jobs report worked against the narrative that the Federal Reserve needs to cut interest rates to steer the economy in the right direction.

Dow, S&P 500, Nasdaq Retreat from Record Highs

All of Wall Street’s major indexes traded lower after the open, reflecting a weak pre-market session for Dow futures. The Dow Jones Industrial Average (DJIA) fell 103.32 points, or 0.4%, to 26,862.68.

Dow Jones Industrial Average swings sharply lower after the open on Friday. | Source: Yahoo Finance.

The broad S&P 500 Index of large-cap stocks fell 0.4% to 2,983.97. Most of the S&P 500’s primary sectors reported declines.

Meanwhile, the technology-focused Nasdaq Composite Index fell 0.5% to 8,128.14.

A measure of implied volatility known as the CBOE VIX rose sharply after the open. The so-called “fear index,” which usually trades inversely with the S&P 500, jumped almost 9% to 13.66.

Nonfarm Payrolls Bounce Back in June

Hiring in the U.S. picks up sharply in June as employers add 224,000 workers. How will this impact the Federal Reserve’s next course of action? | Source: Shutterstock.

The U.S. labor market rebounded sharply in June, with employers adding 224,000 workers to payrolls, according to the latest government nonfarm payrolls report released on Friday. Analysts in a median estimate had called for a monthly tally of 160,000.

America’s unemployment rate ticked up slightly to 3.7% from 3.6% as labor force participation increased slightly.

Average hourly earnings, which are a proxy for wage inflation, rose 0.2% from May and 3.1% from a year earlier. Both figures were slightly below forecasts.

Investors are betting heavily that the Federal Reserve will slash interest rates at its July policy meeting, but strong jobs data challenges the narrative that imminent cuts are needed to safeguard the recovery. At last check, Fed Fund futures prices still implied a 100% likelihood of a rate cut following the July 30-31 policy meeting.

The U.S. economy is coming off a solid first quarter, with gross domestic product (GDP) expanding 3.1% annually. Things changed considerably in the second quarter, as hiring, manufacturing and business investment weakened. Economic growth likely slowed to 1.3% between April and June, according to the Atlanta Fed’s GDP tracker.

Click here for a real-time Dow Jones Industrial Average (DJIA) price chart.

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