- The Dow Jones Index pared losses on NFP Friday, but remains in the red for the week.
- In September, the US created many more jobs than expected.
- Market hopes for another massive Fed rate cut have faded.
The Dow Jones Industrial Average (DJIA) rose after U.S. nonfarm payrolls (NFP) data beat expectations. Net U.S. NFP job growth rose to 254,000 on Friday, dampening market hopes for a second twice-wide interest rate cut by the Federal Reserve (Fed) on November 7.
The U.S. unemployment rate fell again to 4.1% from the previous 4.2%, further underscoring the healthier-than-expected U.S. labor market. Moreover, several months of NFP publications recorded a significant upward correction. The previous NFP total for August was increased by an additional 17,000, while the July figure skyrocketed by 55,000, taking the total to 144,000.
Annual wage growth also strengthened in September, reaching 4.0% y/y from the previous 3.9%. Investors expected growth in average hourly earnings to decline back to 3.8% in September. With wages and net job gains far exceeding all expectations, the interest rate market’s expectations for a faster pace of rate cuts were a resounding success, ending a trading week that was mediocre at best.
According to CME’s FedWatch Tool, investor expectations for the Fed’s November call dropped sharply after the introduction of NFP; Interest rate futures speculators currently see a 95% chance that the Fed will cut interest rates by a modest 25 basis points on November 7, with the final 5% betting on no change in the Fed funds rate.
Dow Jones News
Despite a moderate recovery from the surprising NFP print, the Dow recorded only a moderate gain. The index broadly gained ground on the reaction to U.S. employment data, rising nearly 400 points from the bottom to the top, but the index stabilized at a more reasonable 200-point level.
Two-thirds of the securities in the Dow Jones Index rose on Friday, led by JPMorgan Chase (JPM). JPMorgan rose 3% that day, topping $210 per share. On the other hand, Home Depot (HD) fell 1% to $407 per share.
In other stock news, Amazon ( AMZN ) rose nearly 2% to $185 per share on Friday on upbeat jobs data and a quick resolution to the East Coast dockworker strike.
Dow Jones Price Forecast
The Dow Jones is generally on an upward trajectory, approaching a key resistance level, while technical indicators suggest positive momentum in the market. The index is currently hovering around 42,200, so it was already under selling pressure. investors are watching to see if the Dow can overcome this resistance, which could open the door to further gains in the compact term.
Despite the overall positive trend, recent price movements reflect uncertainty. The daily candles were switching between bullish and bearish, indicating that the market was taking a break while testing the resistance level.
“We are currently at a critical moment in the market. A clear break above this resistance may result in renewed buying interest,” noted one technical analyst. “However, if the Dow fails to break this level, we could see a retreat towards the moving averages.”
Dow Jones daily chart
Economic indicator
Unemployment rate
Unemployment rate published by the Municipality US Bureau of Labor Statistics (BLS) is the percentage of the total civilian labor force that is not in paid employment but is actively seeking employment. This rate is usually higher in economies in recession compared to developing economies. Generally speaking, a decline in the unemployment rate is seen as bullish for the US dollar (USD), while an boost is seen as bearish. That said, the number alone usually cannot determine the direction of the market’s next move, as it will also depend on the headline nonfarm payroll reading and other data in the BLS report.
