Fed policy questioned after July jobs report

  • US stocks closed weakly on Friday after July’s strong jobs report pushed back recession concerns.
  • The United States created 528,000 new jobs in July, roughly double expectations as the unemployment rate fell to 3.5%.
  • Strong job growth will put pressure on the Fed to continue its interest rate hikes.

U.S. stocks closed mixed on Friday as investors weighed the catch-22 scenario in which a strong economy likely means more interest rate hikes from the Federal Reserve.

The American Economy added 528,000 new jobs in July, which was more than double economists’ consensus estimate of 250,000 new jobs. The strong increases were driven in part by the hospitality sector and pushed the unemployment rate down from 3.6% to 3.5%.

The American Economy has now fully recovered all jobs lost during the COVID-19 pandemic.

While the jobs report is good news for the US economy, as it runs counter to the idea that a recession is imminent, it also puts pressure on the Federal Reserve to continue. its aggressive interest rate hikes as it attempts to rein in inflation. The Fed’s next FOMC meeting where it will determine what to do with interest rates will be at the end of September.

Here’s where the U.S. indices stood at the 4 p.m. ET close on Friday:

The July jobs report also showed a better-than-expected gain in the average hourly wage, with an increase of 0.5% to $32.17, ahead of estimates of a gain of just 0.3% .

The Democrats’ Inflation Cut Act has also put pressure on stocks, which now appear to have the full support of the 50 Senate Democrats needed to pass the reconciliation bill. Thursday night’s agreement between Krysten Sinema and Chuck Schumer removes the deferred interest tax relief closure, and instead imposes a 1% excise tax on share redemptions.

Corporate stock buyback programs have long been seen as a big source of demand for U.S. stocks, and JPMorgan estimated earlier this year that stock buyback programs would hit a record $1 trillion in 2022. A 1% tax may not be high enough to completely deter this practice, as dividends are taxed at a higher rate, but it could ultimately reduce demand for stocks.

Gas prices in Europe are on the way to up for the third week in a row as Russia continues to threaten to cut off its supply. Meanwhile, Russia has taken second place in exporting oil to India, as it sells the raw material at a discounted price.

another obscure China-based stocks posted dizzying gains on Friday, with Magic Empire jumping over 5,000% on its IPO. The financial services company saw its market value peak at nearly $5 billion on Friday, despite only generating $2 million in annual revenue last year.

West Texas Intermediate Crude oil fell 0.35% to $88.23 a barrel. Crude Brentthe international oil benchmark, rose 0.07% to $94.19.

Bitcoin fell 1.07% to $22,933. Ether prices rose 1.22% to $1,681.

Gold fell 0.88% to $1,790.80 an ounce. The 10-year Treasury yield rose 14 basis points to 2.84%.

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