Dow Jones Industrial Average dodges a hike December still prices

In July, the American labor market contracted, prompting a modest gain of approximately 65 points in the Dow Jones Industrial Average (DJIA) as it approached 54,000. The session high of just above 54,100 was not surpassed since that moment. The DJIA responded to the labor market data, with rate futures moving in one direction, indicating an increase in interest rates.

The probability of a quarter-point rate hike in September dropped to 44.1%, down from 59.2% a week prior, while the chance of a hold decreased to 55.9%. The target of a 3.50% to 3.75% range by December carries zero probability, implying that a quarter-point rate increase is still included in the expected range by year-end. The bond market divided the report based on maturity, with two-year notes yielding 4.204% and the thirty-year yield remaining at 5.208%, similar to its highest level since 2007.

While the unemployment rate dropped to 4.1% from 4.2%, it was attributed to a decline in labor force participation rather than a recovering labor market. Wage growth slowed to 3.2% year-over-year, and layoff announcements were near a two-year low, indicating a hiring freeze instead of widespread firings. The index reached a record high just under 54,750 earlier in the week, on track for a second consecutive weekly gain, with crude oil near $78.00 influencing the market.

With no Federal Reserve meeting in August, the September decision awaited the release of the labor market data and the Consumer Price Index (CPI) report. The inflation expectations in the market remained unchanged following the payrolls report. The resistance level is just above 54,100, while support is found at 53,800, where the index has tested before. The bias leans bullish if the 53,800 area holds, with the next goal being the record near 54,750.