USA stocks open lower as strong jobs data curb rate-cut hopes

Jeannie Matthews
July 7, 2019

Local numbers for June won't be available for a few more weeks. The transportation and logistics sector was one of the many areas of strength in June, led by improved gains among parcel and trucking companies.

The market's downbeat response to an upbeat report reflects investors' white-is-black logic.

(CNN)President Donald Trump on Friday renewed his calls for the Federal Reserve to lower interest rates, despite a surprisingly strong jobs report.

Traders were betting Friday that a rate cut in late July may be less likely now.

The only problem with this reasoning is that it amounts to saying stocks need a weaker economy to prosper.

In early May, Trump increased penalty tariffs on $250 billion in Chinese goods and threatened to broaden the tariffs to $300 billion in other Chinese imports after trade talks between the world's two biggest economies stalled. "This makes no sense to me".

Asian stocks traded mostly higher to start the day. The yield on the 10-year Treasury rose to 2.05%.

Meanwhile, the Fed is sending fairly optimistic economic signals after opening up the possibility of cuts last month, when they cited muted inflation pressures and an economic outlook clouded by a USA trade war and slower global growth. Home sales are rebounding.

June results for the overall economy serve as a welcome sign of relief for the US economy.

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Consumer spending is rising moderately, with confidence easing from its recent lofty levels. That would roughly match the average monthly gain this year and would mark a healthy rebound from the meager 75,000 jobs that were added in May.

Despite solid hiring numbers, the report also pointed to persistent moderate wage gains and mounting evidence that the economy was losing momentum, which could still encourage the Fed to cut interest rates this month.

The Federal Reserve on Friday repeated its pledge to "act as appropriate" to sustain the current economic expansion, now the longest in US history, while noting that most Fed officials have lowered their expectations for the future course of interest rates.

The president has repeatedly criticized the Fed and Chairman Jerome Powell for raising interest rates in 2018 and failing so far to reverse course.

Those are not the prototypical conditions for a rate cut. -China trade war, as well as persistent muted inflation. "Overall, the labor market still remains pretty tight, even as we've seen the pace of jobs downshift". Those additional job cuts in the second quarter brings the first-half total this year to 330,987, which is a 35% increase from the same period last year.

Then there is the political backdrop.

Employers have expanded payrolls by 224,000 jobs in June, marking a surge after a weak May, the Bureau of Labor Statistics reported on July 5.

Powell is slated to testify on Capitol Hill before the House Financial Services Committee Wednesday and the Senate Banking Committee Thursday, during which he's expected to shed light on the Fed's interest rate policy.

But, President Trump said that the economy would, but "we don't have a Fed that knows what they're doing".

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