Friday’s August US jobs report brought some good news to almost everyone – with overall slower job gains and hourly wages falling so sharply that traders are trimming expectations for Federal Reserve rate hikes while still reflecting healthy developments pace of recruitment.
Analysts dubbed the report “Goldilocks” but trading on the jobs data and a glimmer of hope that the world’s largest economy might avoid a recession turned dangerous. That’s because the S&P 500 index encountered strong technical resistance around the 4,000 mark, where the index’s 50-day and 100-day moving averages converge, according to Ben Emons, managing director of global macro strategy at Medley Global Advisors in NYC.
Source: Bloomberg
“I see the S&P 500 as being in a perfect technical bear market and maybe going back to the June 16 low,” Emons said over the phone. “The moving averages are watched closely because they tell you the index’s momentum, and they say it’s still pointing down.”
Friday’s release showed that the US added a robust 315,000 jobs in August, an increase around in line with forecasts. Unemployment rose to 3.7% from 3.5% and hourly wages rose a modest 0.3% to $32.36 in August, the smallest gain in four months.
Although the report still left the door open for an aggressive 75 basis point rate hike by the Fed on Sept. 21, Fed funds futures traders reduced the likelihood of such a move, cutting rates to 56% from 75% on Thursday . according to the CME FedWatch tool.
On Friday, all three major stock indexes closed lower after giving up initial gains that followed the August jobs report. The S&P 500 SPX, -1.07%, ended down 1.1% at 3,924. Dow Industrials DJIA, -1.07%, and Nasdaq Composite COMP, -1.31%, also ended down 1.1% and 1.3%, respectively, as Treasury yields retreated from gains on Thursday.