Stocks wrap best week in seven months as rate cut odds rise

Jun 11, 2019, 00:41
Stocks wrap best week in seven months as rate cut odds rise

Even with Powell and Fed-heads talking about the possibility of lowering interest rates and that they are monitoring economic developments, it still feels unusual after nearly 30 years of seeing the business cycles to cheer for weaker economic growth reports.

The dollar and Treasury yields fell as the data signaled the labor market - a pillar of strength for an economy headed for a record expansion - was facing new pressures even before Trump threatened tariffs on Mexican goods in addition to proposed higher levies on Chinese imports.

Still, economists had expected 185,000 jobs added in May, so 75,000 fell far short of those expectations.

The buck dropped as markets assumed that the slower-than-expected job tell supposed a fee decrease by the US Federal Reserve used to be more doubtless. Add Jobs Report as an interest to stay up to date on the latest Jobs Report news, video, and analysis from ABC News. "With only 75,000 new jobs in May, this is a major slowdown from 2017, 2018 and the first four months of 2019". But the unemployment rate has remained at 3.6 percent, which is the lowest since December 1969, according to the Bureau of Labor Statistics (BLS). The unemployment rate held steady at 3.6%. Stocks on Wall Street were trading higher.

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"We are closely monitoring the implications of these developments for the USA economic outlook and, as always, we will act as appropriate to sustain the expansion", Fed Chairman Jerome Powell said Tuesday at a conference in Chicago. A strong dollar, which makes US goods costlier overseas, has also slowed the production and export of manufactured goods. Wages rose by an average of 3.1% compared with a year earlier.

Hiring in the US has slowed down and the results have experts anxious about a slowing economy. Smaller raises, combined with slower hiring, could diminish consumers' willingness to spend in the coming months.

"Economic growth is clearly slowing, as indicated by the slower pace of job growth in May, downward revisions in prior months, and a leveling out of wage growth", said Mike Fratantoni, chief economist for the Mortgage Bankers Association. That would be down from a blockbuster reading of 263,000 jobs in April, but above the 3-month average of 169,000 jobs.

Automakers are cutting jobs and production as U.S. sales have slowed. Alluding to the Trump administration's ongoing trade dispute with China and the imminent imposition of migration-related tariffs on Mexico, Powell said that the Fed "will act as appropriate to sustain the expansion".

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That worries central bankers, who are eager to keep the economy growing in the face of rising trade tensions.

Ford Motor Co. said last month that it was shedding 7,000 white-collar jobs - about 10% of its salaried workforce - as part of preparations for an industry driven more by electric and autonomous vehicles.

In the wake of the weak report financial markets priced in a rate cut as early as July and two more later this year.

Workers and economists had hoped to see stronger wage gains this summer as unemployment remained low, but wage gains appear to be stalling.

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