The S&P 500 and Nasdaq Composite hit record highs on better-than-expected US jobs data for June.
Data from the US Bureau of Labor Statistics showed that 147,000 new non-farm jobs were created, far exceeding the estimate of 110,000, while the unemployment rate fell to 4.1%, demonstrating the unexpected strength of the US labor market.
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June jobs data beat expectations, with a gain of 147,000 nonfarm jobs.
US stocks rose sharply across the board, with Dow Jones up 381 points and Nasdaq up 1%.
The bond market reacted, with US Treasury yields rising on expectations the Fed will keep interest rates unchanged through September.
How does June jobs data reflect the strength of the US labor market?
June data showed the US labor market was stronger than expected, as the US Labor Department reported 147,000 new nonfarm jobs, beating the forecast of 110,000 and May's revised figure of 144,000.
June is a testament to the sustained recovery of the US economy after a volatile period in 2023 and early 2024, according to Sarah Bloom Raskin, former Vice Chair of the Fed.
The June jobs data is “clear evidence that the U.S. economy remains resilient and able to meet the challenges ahead.”
Sarah Bloom Raskin, former Vice Chair of the Fed, July 2024
The unemployment rate fell to 4.1%, against forecasts of a rise to 4.3%, providing a strong boost to the stock market, erasing concerns after ADP reported a decline of 33,000 private sector jobs in the same month.
Stock and bond markets react to new jobs data
US stocks rose across the board, with the Dow Jones up 381 points (0.9%), the S&P 500 up 0.8% and the Nasdaq up 1%. This is a sign that investors are positive about the economic outlook and long-term purchasing power.
US government bonds also had a notable performance as bond yields rose sharply, reflecting expectations that the Fed will not cut interest rates at its July meeting but keep them unchanged until at least September.
The bond market is sending a clear signal that the Fed will maintain current monetary policy at least through the end of the third quarter, as jobs data has been positive and inflation remains firmly under control.
Chris Turner, Head of FX Strategy at ING, July 2024
CME Group's FedWatch tool shows a more than 95% chance the Fed will keep interest rates unchanged at its July meeting, causing investors to adjust expectations and pushing up long-term bond yields.
Impact of new trade policy and tax laws on US financial markets
The US-Vietnam trade relationship and warnings from the government about tariffs have affected investor sentiment, especially when President Trump has just announced a new trade deal and is preparing to end the tariff suspension period.
Inflation is not a major concern as many analysts believe the market can “digest” adverse trade developments without causing major disruptions.
Meanwhile, the corporate tax bill passed by the US Senate and sent to the House of Representatives, if progressed, could significantly change the tax environment by fall 2024, affecting corporate profits and stock valuations.
Shortened trading session and stocks hitting new highs show market strength
Despite Thursday's early close at 1 p.m. ET due to the July 14 holiday, the S&P 500 and Nasdaq Composite indexes were up 1.5% for the week, while the Dow Jones Industrial Average jumped 2.1%.
Thirty-six stocks in the S&P 500 hit 52-week highs, including 25 all-time highs, including names like Royal Caribbean, American Express, Capital One, Goldman Sachs, JPMorgan, Morgan Stanley, Nvidia and Oracle.
The Russell 2000 index of small companies also rose 0.6%, returning to positive territory for the year, showing that the growth trend is spreading widely from large corporations to small businesses.
Frequently Asked Questions
Which agency released the US employment data for June? The data was released by the US Bureau of Labor Statistics on July 3, 2024. How did the market react to the recent employment report? Stocks rose sharply, with the Dow Jones up 381 points, the Nasdaq up 1%, and US government bond yields rising on expectations that the Fed would keep interest rates unchanged. What is the unemployment rate for June? It has fallen to 4.1%, lower than the initial estimate of 4.3%. How did the Fed react to this data? The market expects the Fed not to cut interest rates at its July meeting but to maintain them until at least September 2024. How will the new US tax law affect the market? It is pushing for a stock adjustment due to the possibility of significant changes to the corporate tax bracket, affecting profits and investments in the fall.
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