Wall Street caves as robust employment points to further rate hikes

Wall Street ended the day mostly in the red, on a weekend marked by labor market data in the United States, with the rise in the number of jobs created doubling analysts’ estimates.

The industrial Dow Jones added 0.23% to 32,801.51 points, while the global benchmark S&P 500 dropped 0.17% to 4,145.07 points. The technological Nasdaq Composite dropped 0.50% to 12,657.56 points. Even so, the banking sector, which benefits from the increase in policy rates by the US Federal Reserve (Fed), helped to stop losses on Wall Street.

528,000 jobs were created in July, according to data from the US Labor Department this Friday. The number of employees even reached the highest value ever, surpassing by 32 thousand jobs the maximum recorded in February 2020, in the period before the pandemic. The unemployment rate, in turn, dropped to 3.5%, equaling five-decade lows.

The strength of the labor market, supported by these data, may be a sign of a possible more aggressive hike in interest rates by the Fed in September: in the order of 75 basis points.

The US employment report is extremely important, as it is one of the indicators that the central bank will assess before the decision is taken in September.

If, on the one hand, the employment data are “an indicator of optimism for the growth of the economy”, on the other “they eliminate the possibility of a smaller rise in interest rates by the Fed, and that was what was sustaining the markets in the last few days” explained analyst Adam Crisafulli of Vital Knowledge, to Bloomberg.

Source: Jornal de Negócios by www.jornaldenegocios.pt.

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