On October 7, 2022, a “Now Hiring” sign hung on a storefront in the Adams Morgan neighborhood of Washington, DC.
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This report comes from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open keeps investors updated on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
The next day’s decline
Wednesday, The S&P 500 and Nasdaq fell for a second straight day, but the Dow Jones Industrial Average bucked the trend with modest gains. The pan-European STOXX 600 index closed about 1% lower, tracking losses on Wall Street and Asia-Pacific markets. Technology stocks were the biggest losers, down 3.2%.
a shocking number
U.S. job openings fell to 7.67 million in July, 237,000 fewer than the downwardly revised figure in June. Not only was this below expectations of 8.1 million, it was also the lowest level since January 2021.
Be prepared to lower interest rates
Inflation of 2% has been the Fed’s goal, but now the central bank appears to be turning its attention to the job market. Atlanta Fed President Raphael Bostic – known as a hawk, meaning he supports raising interest rates – said he is ready to lower rates even though inflation remains just above 2% .
The inverted curve briefly recovers
When the 10-year Treasury yield falls below the 2-year Treasury yield, we have a yield curve inversion, which has predicted most recessions since World War II. The current curve inverted in July 2022 but briefly normalized on Wednesday. Don’t get too relaxed, though: The curve usually recovers before a recession hits.
(PRO) Loud Recession Crowd
Analysts and market watchers have been expecting a recession in the U.S. economy for years. This hasn’t happened yet. In fact, the opposite is true: The U.S. economy is so resilient that it is considered an outlier among developed economies. But CNBC Pro’s Bob Pisani writes that the recession crowd is once again dominating the market.
bottom line
The market is in chaos. Investors want rate cuts because they are a tailwind for the market. But rate cuts are often driven by negative economic data. This leads to a confusing scenario where “bad news is good news, but maybe the bad news is so bad that it might just be bad news?”
The confusion stems from the Fed’s dual, often conflicting missions: maintaining price stability and maximizing employment. Now that inflation appears to be cooling, the Fed will turn its focus to the job market.
Bostic’s comments were released around the same time as the disappointing JOLTS investigation, making his comments all the more important. Bostic also acknowledged that “the data and our grassroots feedback indicate that the economy and labor market are losing momentum.”
Faced with the JOLTS report and Bostic’s comments, traders now see a 45% chance of a 50 basis point rate cut at the Fed’s September meeting CME Group’s Federal Reserve Watch. A week ago the proportion was 38%.
That hope could prevent the major indexes from suffering deeper losses. In fact, the market was mixed, reflecting the chaotic environment. this Standard & Poor’s fell 0.16% but Dow Chemical up 0.09%.
And although Nasdaq Drag down 0.3% NVIDIA fell 1.66% (although the chipmaker denied reports of a subpoena), as other technology and chip stocks recovered from the previous session’s losses. For example, AMD up 2.87% Tesla An increase of more than 4%.
If you haven’t seen this meme, google “kombucha girl” or Brittany Brodsky. The first time she tried kombucha, her expression cycled rapidly between disgust and pleasure. This may be what the market looks like now.
–CNBC’s Jeff Cox, Sarah Min and Samantha Subin contributed to this report.
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