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Money Matters: Pre-Market Trading Slumps As The DOW Drops, Wall Street Reacts To The Jobs Report

If the jobs numbers are moving up and the unemployment rate is going down, why the heck is Wall Street on edge?? The August jobs report was released and it seems as if Wall Street is in a panic.  A boost in jobs and people being unemployed should be a good thing. Why cause a world-wide panic when it is not necessary, be positive that the numbers are in the favor of the working class.

Read more as reported by USA Today:

wall street

Stocks are slumping in pre-market trading as Wall Street reacts to the August jobs report — the last reading on the employment picture before the Federal Reserve’s key meeting on interest rates in mid-September — which produced less new jobs than expected but the lowest reading on the nation’s unemployment rate in more than seven years.

This is a potentially market-moving data point, as it could sway the Fed one way or the other when it comes to deciding whether to hike rates for the first time in almost a decade. Wall Street is anxious, of course, as low borrowing costs have been a  key underpinning of the stock market rally that began back in March 2009.

The economy created just 173,000 new jobs last month, but the unemployment rate dipped to 5.1%, a bigger-than-expected drop — and the lowest since April 2008, when the jobless rate was 5%, according to data from the U.S. Bureau of Labor Statistics. Wall Street economists were expecting 218,000 new jobs in August and the unemployment rate to decline to 5.2% from 5.3%. In addition to the shrinking unemployment rate, job gains for July were revised up to 245,000 from 215,000, and June’s job gains were bumped up by 14,000. The upward revisions added to initial reaction that this is a positive jobs report.

In pre-market trading, about 10 minutes after the 8:30 a.m. ET release of the jobs report, the Dow Jones industrial average was down about 270 points, or about 1.5%. The Standard & Poor’s 500 stock index is off about 1.5%, as is the NASDAQ composite.

The reaction of the stock market in pre-market trading suggests investors are betting that the Fed will move to hike rates in two weeks, despite the fact the mixed report provides reason for both a hike and a delay, experts say.

“August’s employment report is fairly mixed and can be used to make a case for or against a rate hike at the upcoming Fed meeting,” Paul Ashworth, chief U.S. economist at Capital Economics told clients in a research note after the release of the employment data. “As far as we’re concerned, the September meeting is a 50-50 toss-up.”

A similar reaction was articulated from Steven Ricchiuto, chief economist at MSUSA. He notes that while the headline jobs number came in below expectations, positives such as the upward revisions to the prior two months and the 5.1% unemployment rate, suggest that the bulls and bears will continue to debate if Fed ‘lift-off’ will occur on Sept. 17.

The latest jobs data will leave everyone maintaining their position on the Fed. Not the decisive data the Street wanted,” Ricchiuto said in a research note.

The Fed has been moving ever closer to a rate hike, but its calculus has been changed by the recent worldwide global turbulence, which has created a good deal of market instability at the same time it is readying to raise rates for the first time since 2006. While the Fed says it is moving closer to a hike, and has said it is looking for continued improvement in the U.S. labor market, there is a big debate on Wall Street now as to whether now is really the best time to boost rates.

Stocks around the globe were wobbly, with shares in Japan off 2.2% and down 0.5% in Hong Kong. European stock markets were off around 2%, ahead of the key jobs number.

Source: USA Today

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