Wall Street reaction business amid countervailing forces

U.S. market indexes are attempting to move upward for the first time this week, as the slowdown shown by the labor market has eased pressure on bonds, giving growth stocks room for recovery.

In particular, the industrial index Dow Jones is enhanced by 0.35% moving on 31,899 unitsthe enlarged S&P 500 rises by 0.6% at 4,007 unitswhile trades are boosted by the weighted with technology development securities Nasdaqwhich is located at 11,997 units with +1%.

However, on a month-by-month basis, which ends today, after the July rally, the indices are heading to close a difficult August with losses of more than 3% for the Dow and S&P 500, while the Nasdaq loses around 4%.

In today’s session, new labor market data from research institute ADP showed that the private sector in the US continued to add jobs in August, but having slowed significantly from the previous month.

Specifically, jobs rose by 132,000 in August after July’s rise of 270,000, well missing market estimates that had expected an acceleration to around 300,000 jobs.

The report’s announcement led to a deceleration in short-term US government bond yields, shearing the divergence from long-term ones, in the consistently inverted curve (with short-term yields higher than long-term ones).

At the same time, signs of a weakening labor market have rekindled expectations in some parts of the market that the Fed’s cycle of aggressive rate hikes is coming to an end.

Something that mainly affects the securities of companies with a growth character, such as above all technology, which are based more on the expectations of their future returns and are therefore more dependent on the financing conditions.

In this climate, after all, the so-called Big Tech, the technology giants of the capitalization are outperforming, with gains of more than 1% for Alphabet, Amazon, Microsoft, Apple, while Facebook’s parent company Meta is rallying 5.4%.

At the same time, Netflix also jumps more than 5%, Twitter is up 1.5% and Tesla is up 1%.

At the top of the Dow Jones is Amgen with +1.7%, while McDonalds and Walgreens Boots Alliance are moving in the region of +1.3%, with Chevron instead applying pressure with a fall of 1.4% in the context of the new plunge of oil prices.

“We think we’re near the end of this cycle, but certainly that depends on a lot of things,” said Brenda Vingiello, chief investment officer at Sand Hill Global Advisors.

According to her, “there is no doubt that the Fed will raise interest rates in September, and probably two more times this year, but at this level they will have already done a lot and we will have moved into restrictive territory.”

Despite any expectations, comments from Fed officials continue to underscore the need for the Bank to maintain its aggressive stance, with Loretta Mester today forecasting an increase in the cost of federal borrowing above 4% by early 2023.

As a reminder, the range of the federal funds rate, which determines what banks charge each other for overnight lending and is linked to many consumer debt securities, currently stands at 2.25% – 2.5%.

Cleveland Fed President Loretta Mester also estimated that interest rates will remain high “for some time,” a phrase used in recent days by both Fed President Jay Powell and New York Fed President John Williams.

According to her, real interest rates, ie the difference between the Fed rate and inflation, should “move into positive territory”.