New York – Stock futures took a hit after a surprising increase in nonfarm payrolls for the month of May, leading to higher yields and dampening hopes of an imminent interest rate cut by the Federal Reserve. The Dow Jones Industrial Average futures fell by 119 points, Nasdaq-100 futures were down 0.2%, and S&P 500 futures slipped 0.3%.
The Labor Department reported a 272,000 increase in nonfarm payrolls, surpassing the estimate of 190,000 from Dow Jones, and April’s figure of 175,000. Despite the strong job growth, the unemployment rate rose to 4%. The data raised concerns among investors who were anticipating signs of a weakening labor market that could prompt the Federal Reserve to consider implementing interest rate cuts.
Economists and market analysts have noted that although recent economic data suggests a slowdown in the economy, the strong job report may indicate a more resilient labor market, which could influence the Federal Reserve’s decision-making process in the coming months. Ed Clissold, chief U.S. strategist for Ned Davis Research, expressed optimism about the market’s performance, citing strong earnings reports and the absence of immediate signs of recession.
The job report comes on the heels of the European Central Bank’s decision to cut rates for the first time in over a year, putting pressure on the Federal Reserve to potentially adjust its monetary policy. The Fed is expected to announce its decision on rates after its upcoming policy meeting on June 11-12. Market data suggests that while rates are likely to remain steady for now, there is a 70% chance of a rate cut in September, according to the CME FedWatch Tool.
Despite the uncertainty surrounding interest rates, all three major stock indexes are on track to end the week with gains. The Dow Jones is up by 0.52%, the S&P 500 has seen a 1.43% increase, and the Nasdaq is poised for a 2.62% advance. Investors will be closely watching for updates from the Federal Reserve as they navigate the current economic landscape and market conditions.