Stock markets offered a preview of how investors might react to a possible drop in the number of new jobs created in May when they rebounded this week following other signs that the labor market continues to cool.
The S&P 500 is up 1.4 percent this week, and the 10-year government bond yield, which props up borrowing costs on corporate and consumer debt, has fallen 0.2 percentage points, about the same. than a typical interest rate cut by the Federal Reserve.
Investors raised bets on how soon the Federal Reserve could cut interest rates after data on Tuesday showed job openings fell to their lowest level in more than three years.
Investors still expect the Federal Reserve to begin cutting interest rates in September, but bets have increased that it will choose to start earlier, in July. Other central banks around the world have already started lowering rates, including the Bank of Canada on Wednesday and the European Central Bank on Thursday. Analysts at Citigroup and JPMorgan Chase are among those predicting a move by the Federal Reserve in July. (Fed officials will meet next week to set rates, but most analysts believe they will leave them unchanged.)
Some investors have noted that other data on the U.S. labor market, such as the employment component of recent manufacturing surveys and the number of people voluntarily leaving their jobs, have signaled that the economy could be starting to weaken.
That’s part of the reason the government’s monthly jobs data release has become one of the most closely watched releases on investors’ radar, seen as vital for assessing the path of inflation and interest rates.
With investors and economists already expecting a further slowdown in the number of new jobs created in May and more data to come before the Fed meets in July, some analysts said it would take a big surprise to get a strong reaction from the Fed. market.
Already this week, Nvidia and Microsoft, both beneficiaries of the artificial intelligence boom whose growth is aided by lower interest rates, drove the S&P 500 to a new high.
Nvidia on Wednesday became the third company, after Apple and Microsoft, to have a market value above $3 trillion, and was briefly worth more than Apple before slowly falling on Thursday. Microsoft remains the most valued company in the United States, with 3.2 trillion dollars.