U.S. stocks hit a record after the jobs data. The market is waiting for three rate cuts

Three major U.S. stock indices hit new records at the beginning of trading on September 5. Investors' optimism was triggered by the labor market statistics for August: unexpectedly low employment growth finally convinced the market that the U.S. Federal Reserve will start to reduce interest rates in September. Traders believe that this may happen three times before the end of the year, although recently even one easing was questionable.

- The main U.S. stock index, the S&P 500, rose 0.4 percent in the first minutes of trading to 6532.45 points, an all-time high.

- The Nasdaq Composite index, heavily weighted toward technology companies, added about 0.7% to peak at $21,878.81 points - also a record.

- The blue-chip index Dow Jones Industrial Average was up 0.25 percent at 45,770.2 points.

- "Wall Street Fear Index" VIX, on the contrary, declined by 3.5% to less than 15 points (20 points is considered an alarming mark).

The U.S. added 22,000 new jobs outside of agriculture in August, the U.S. Bureau of Labor Statistics reported. The figure was about three times lower than economists polled by Reuters had predicted. The unemployment rate rose slightly from July, to 4.3%, but that was in line with expectations.

Traders are now betting that the U.S. Federal Reserve will cut interest rates three times before the end of 2025 - by a quarter of a percentage point at a time, Barron's reports. This probability is now estimated at 70.8%, although before the publication of statistics was 50.6%, shows the CME FedWatch tool.

The estimate of the probability that the Fed will cut the rate at the next meeting in September by 0.5 percentage points has also increased: it now stands at 16%, although before the publication of the data it was 12%.

- "The labor market has weakened, and the shift from public sector job growth to private sector growth will require lower rates. The Fed will start cutting them this Ma, and we expect a series of further cuts," said Gregory Faranello, head of U.S. rates trading and strategy at AmeriVet Securities, as quoted by Bloomberg.

- "The report generally maintains a balance between confirming expectations of a series of Fed rate cuts and no new recession worries, so the broad market reaction should be moderately positive. But concerns about the state of the economy are starting to creep in, and further deterioration in the labor market will soon shift the balance to bad news [being perceived as] just bad news," Principal Asset Management' s chief global strategist Xi Xi Sha said.

- "The main thing is that it does put the Fed's return to cutting rates on the table, and if the economy doesn't fall off a cliff in the process, that's a pretty good combination for risk assets," BlackRock's Jeff Rosenberg said on Bloomberg TV.

This article was AI-translated and verified by a human editor