Stock markets climb despite disappointing jobs report data

Stocks close higher as investors weigh conflicting economic data, rising hopes of Fed rate cut
June 6, 2019
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June 11, 2019

Stock markets climb despite disappointing jobs report data

By Carleton English

Topsy-turvy thinking is back in style on Wall Street.

Bad news on Friday — that the US economy only added 75,000 jobs last month, sorely short of the 175,000 analysts expected — was hailed as good news on Wall Street, with traders betting that the lousy jobs data will boost the likelihood of looser rates from the Fed.

The Dow Jones industrial average soared 263.28 points to close at 25,983.94, as the Labor Department’s disappointing data for May bolstered hopes that the Federal Reserve will cut interest rates as soon as next month — slashing borrowing costs for consumers and businesses alike.

The S&P 500 and Nasdaq also popped, ending the day up 1.1 percent and 1.7 percent, respectively.

Economists surveyed by Bloomberg now believe there’s an 83 percent likelihood the Fed will slash rates at its July 31 meeting. That likelihood goes up to nearly 96 percent for its Sept. 18 meeting.

Thanks to Friday’s report and recent dovish language from Fed officials, the stock market notched its best week in 2019.

“Are we back to rooting for bad economic data?” Michael Antonelli, managing director at Baird, asked incredulously in an interview with The Post, adding that the market behaves like a “petulant child” when rate hikes are on the table.

Markets were in turmoil in the fourth quarter of 2018 when the Fed was forecasting two rate hikes for 2019, noting strong growth in jobs and wages nationwide.

But as tensions escalated between the US and its trading partners this spring, the Fed signaled that it was tabling rate hikes for 2019. As the strains got worse — with the US now threatening tariffs on goods from Mexico — most Fed-watchers are now forecasting rate cuts in the months ahead.

“The stock markets are banking on the Fed’s ability to step in and save the day, as it has for much of the last decade,” Cliff Hodge, director of investments of Cornerstone Wealth, said Friday.

It was roughly three weeks ago that 71 percent of Fed-watchers surveyed by Bloomberg anticipated at least one rate cut for the year.

That figure swelled to nearly 99 percent in light of Friday’s report and recent looser language from Fed officials.

“We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion,” Fed Chair Jay Powell said Tuesday.

Although Friday’s jobs figure fell below estimates, unemployment still stands at 3.6 percent — its lowest level in nearly 50 years, and wages ticked up 3.1 percent.

“We may have reached a peak in hiring,” Peter Cardillo, chief market economist at Spartan Capital Securities, told The Post, adding that Friday’s data “renewed hopes that the Fed is likely to cut.”

While jobs have been added to the economy for 104 consecutive months, hiring has slowed to an average of 164,000 a month this year compared to 223,000 in 2018.

Cardillo said trade tensions may have made companies more hesitant to hire.

The biggest job gains were seen in professional services and health care last month.

Hiring was weaker in retail, construction and manufacturing.