Wall Street’s Wild Week: Employment, Carry-Trade, and Tech Impact Markets
The stock market thrill ride that began a tumultuous run off the rails Monday seems to be back on track as we end the week.
At yesterday’s close, the U. S. markets had regained much of what they lost Monday and were climbing still higher.
A Series of Unfortunate Events
Monday’s stock rout was not caused by just one incident. The stock market rout on Monday was not caused by one event. It was a result of a series of unfortunate events, and traders’ reactions to them.
- The unemployment rate hit 4.3 percent and employers added fewer jobs in July, according to a Bureau of Labor Statistics report.
- On Monday Japan’s Nikkei stock index dropped 12 percent.
- Many big tech companies such as Apple, Meta, Alphabet, Amazon, and Microsoft reported disappointing earnings.
That was all it took to start a rout.
Thursday Jobless Report – Another Story
Calmer heads prevailed Tuesday. Wednesday saw stocks come back but with some volatility.
By Thursday there was a new report from the Labor Department that bolstered traders’ confidence.
First-time jobless benefits claims declined for the week by 17,000 hitting a seasonally adjusted 233,000. This was less than what the Dow Jones estimated. The market was able to recover after that. All major
indexes of stocks were up on Thursday
. The Dow Jones Industrial Average increased by 683 points or 1.8 percent. S&P 500 rose 2.3 percent by the end of trading. In addition, the Nasdaq rose 2.87 percent.Treasury yields also rose with the 10-year note reaching 3.997 percent and the two-year note rising to 4.043 percent. In addition, the 30-year Treasury Bond climbed to 4.287 percent.
Wall Street OverreactionSome Wall Street figures, such as
JPMorgan Chase CEO Jamie Dimon see Monday’s market gymnastics as an overreaction.
“Markets fluctuate,” Dimon said in a CNBC interview. Dimon said in an interview with CNBC that “markets fluctuate”. Sometimes it is for no reason. “Sometimes it’s almost without reason. It was not a crash. The U.S. stock market crash was partly due to the 12 percent decline in Japan’s Nikkei index. How could that cause a drop in the stock market of this country?
The carry trade is the answer. Since years, hedge funds have borrowed money from Japan at low rates of interest (think zero to a few percentage points above zero). The trader then invested the yens into tech stocks, U.S. government bonds or currencies at a higher rate of return. The Bank of Japan, however, began increasing interest rates in march. In the meantime, there is a widespread belief that the Fed’s rates will be cut soon. Hedge funds started closing their positions. That led to a rout in the Japanese stock market which rippled through other markets including America’s.[for]Trump Dump
One thing that was up dramatically Monday was the Donald Trump fib-ulator. The dial of the fake meter that measures his political spin has done a 180. The former president has claimed for years that Wall Street’s strong performance was due to his reelection. He blamed President Joe Biden, and Vice President Kamala Harri for the Monday stock decline. The Fox News host Neil Cavuto surprised many by rebutting Trump’s claim
. When they are up, it is all because of him. “Yet, some of our largest point drops, including three of the ten biggest, occurred during his presidency. Now, a lot of those were in the COVID years, I get that, but, you know, you either own the markets or you don’t.”
Market Impact on Potential Rate Cuts by Fed
Last week’s jobs report that contributed to Monday’s Wall Street rout has prompted many market watchers to see a Fed rate hike in September as a virtual certainty. Many market watchers believe that a Fed rate hike in September is virtually certain after last week’s jobs report, which contributed to Monday’s Wall Street rout. The Fed’s next scheduled meeting is September 17-18. Some have speculated that the Fed could act before September. This is unlikely, as the stock market has returned to record highs and the economy continues to add jobs. Mortgage Rates Drop
Mortgage rate drops seem to be pricing a Fed rate reduction. The 30-year fixed-rate mortgage on Thursday was 6.47
. This is down from 6.73 percent the previous week. The 30-year refinance rates Thursday were 6.56 percent, a 32 basis points drop from last Thursday. This gives homeowners who purchased when rates were high a chance of refinancing.
Mortgage rates topped out at 7.79 percent last October, according to Freddie Mac
.
The drop in mortgage rates is more a hint at what may come rather than an indication of immediate movement in the stalled housing market. It will likely take more rate cuts by the Fed to spur home sellers to action.Currently, 88.5 percent of homeowners have a mortgage below six percent, according to real estate company Redfin.
Read More:
Caffeine May Impact Gut Health Unexpected Discovery Finds
Fighting Rising Prescription Drug Prices
Come back to what you love! Dollardig.com offers the best cashback on the internet. Sign up, click and shop to get your full cashback.
