Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) opened Friday’s trading session in the green, although a troubling jobs report sent both indices lower.
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August’s nonfarm payrolls showed 22,000 job additions, badly missing the estimate of 75,000 and registering another concerning signal for the labor market. In addition, nonfarm payrolls snapped their streak of 53 consecutive monthly gains after the Bureau of Labor Statistics (BLS) revised June’s reading down by 27,000 to a loss of 13,000 jobs. The BLS also announced that August’s unemployment rate increased by 0.1% month-over-month to 4.3%, in line with the estimate but marking the highest level since October 2021. The unemployment rate has bounced between 4.0% and 4.2% since January.
The data may have sealed the deal for a rate cut at the September 16-17 Federal Open Market Committee (FOMC) meeting, as the market is now pricing in a 90% chance of a 25 bps reduction and a 10% chance of a 50 bps reduction. The odds of a 50 bps cut have come roaring back after remaining at 0% since August 14.
“The warning bell that rang in the labor market a month ago just got louder,” said Fitch Ratings head of economic research Olu Sonola. “A weaker-than-expected jobs report all but seals a 25-basis-point rate cut later this month.”
Meanwhile, the European Union enacted its second-largest antitrust penalty, hitting Google (GOOGL) with a $3.45 billion fine for using anti-competitive practices in its advertising technology business. President Trump responded to the fine through a Truth Social post, saying “We cannot let this happen to brilliant and unprecedented American Ingenuity and, if it does, I will be forced to start a Section 301 proceeding to nullify the unfair penalties being charged to these Taxpaying American Companies.”
A Section 301 proceeding is an investigation conducted by the U.S. Trade Representative (USTR) to determine if a foreign country has engaged in trade practices that have violated U.S. trade laws or harmed U.S. businesses. If so, the U.S. will be able to impose retaliatory measures, such as tariffs.
Despite a flurry of concerning updates, Goldman Sachs macro trader Eric Sheridan believes that investors should buy the September dip. Sheridan argues that a new rate cut cycle will help stimulate economic growth, although it will be crucial for macroeconomic data to “carry the load.” He believes that the federal funds rate will drop to the 3% range, propelling the S&P 500 (SPX) to between 6,700 and 6,900.
The S&P 500 closed with a 0.32% loss while the Nasdaq 100 (NDX) returned 0.08%.
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