Dow Jones Plummets 400 Points as NFP Jobs Data Misses Expectations
The Dow Jones Industrial Average (DJIA) experienced a significant drop of 400 points on Friday following the release of disappointing US Nonfarm Payrolls (NFP) data. The NFP report fell short of expectations and was coupled with a downward revision to previous figures. The lackluster jobs growth indicates a slowing US economy, although not enough to prompt expectations of a double rate cut by the Federal Reserve (Fed) later this month.
Despite the underwhelming NFP employment numbers, there is a prevailing market sentiment in favor of a 25 bps rate cut. The Bureau of Labor Statistics (BLS) reported a rise of 142K in US NFP employment for August, below the anticipated 160K but an improvement from the revised lower figure of 89K for the previous month. While the overall job figures were negative, there was a positive note in the form of faster-than-expected growth in US Average Hourly Earnings, which climbed 3.8% YoY in August.
Although the headline NFP job additions missed forecasts, the underlying data revealed that most of the gains were concentrated in sectors like leisure and hospitality, and health care and social assistance. On the other hand, manufacturing, retail trade, and information sectors experienced declines in employment figures, indicating a potential slowdown in the US economy.
Despite concerns about a looming recession, markets have scaled back from expectations of a double rate cut in September. The CME’s FedWatch Tool now shows a 75% probability of a 25 bps rate cut, with only a 25% chance of a 50 bps cut. The odds have shifted from earlier predictions of a 40-60 split in favor of a double rate cut, as investors analyzed the NFP data and adjusted their expectations accordingly.
Dow Jones Market Performance
On Friday, the Dow Jones witnessed significant declines, with most listed stocks experiencing losses. However, McDonald’s (MCD) managed to gain 1.3%, while Procter & Gamble (PG) rose by 0.5%. In contrast, American Express (AXP) and Amazon.com (AMZN) were among the top losers, with declines of 3.3% and 3.25% respectively.
Dow Jones Price Forecast
Following Friday’s plunge, the Dow Jones chart is approaching the 50-day Exponential Moving Average (EMA) at 40,283, with a 3% decline in the past week. Despite the recent losses, the index remains at a high level, with support expected near the 40,000 price mark.
Economic Indicator: Nonfarm Payrolls
The Nonfarm Payrolls release provides insights into the number of new jobs created in the US, impacting various sectors and the overall economy. The recent data has led to market speculation about potential rate cuts by the Federal Reserve, highlighting the importance of economic indicators in decision-making.