US stock exchanges: Wall Street starts stronger on Friday
The US job market surprisingly shrunk in July. This news is causing euphoria among investors. This is because in the US, the job market has a direct impact on the Fed's interest rate policy.
A surprisingly weak US labor market has sparked euphoria on Wall Street and beyond. On Thursday, the stock markets had closed unevenly. The Dow Jones Industrial Average of blue-chip stocks registered a slight gain at 54,044 points. The broader S&P 500 gained 0.5 percent to 7,750 points. The Tech-Index Nasdaq Composite rose one percent to 26,612 points.
The Nasdaq 100, encompassing the 100 largest non-financial companies listed on the US technology exchange Nasdaq, grew 0.8 percent to 29,599 points. The US labor market did not develop as economists expected in July. Surprisingly, the non-farm jobs market shrank by 23,000 positions. Economists had anticipated a job creation of 80,000.
"See also: US Labor Market Shrinks Surprisingly in July." These news have given investors euphoria. In the United States, the state of the labor market directly impacts the monetary policy of the Federal Reserve (Fed). This institution has a dual mandate for stable prices and full employment. A weak labor market increases pressure on the Fed to lower interest rates to support the economy and protect jobs.
Most recently, investors had been expecting a rate increase in the fall due to rising energy prices and uncertainty caused by the Iran war. According to the Fed-Watch Tool CME, a majority of investors expect no changes in September, while nearly 60 percent anticipate an increase in October. The current interest rate range is between 3.5 and 3.75 percent. At the last meeting, the Fed maintained its interest rates unchanged.
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