Last Friday, the Bureau of Labor Statistics posted jobs increased by 142,000 in August. This pushed the unemployment rate to 4.2%, compared to 4.3%. Panic dominated the markets because falling unemployment weakened a call to cut interest rates by 50 bps.
Stock markets already benefited from the Fed announcing a neutral monetary policy. It held its interest rate policy at above 5% instead of raising it further. However, stock market traders want more. A 25 bps cut would not justify the stock market’s currently elevated valuations.
Markets responded by selling off the magnificent 7 stocks, including Alphabet (GOOG) and Microsoft (MSFT). AI chip leader Nvidia (NVDA) fell the most. This pulled the stock prices of Qualcomm (QCOM) and Advanced Micro Devices (AMD) lower.
Manufacturing Jobs Fell
The manufacturing sector cut 24,000 jobs. This does not bode well for the durables goods market. It suggests that consumers will continue to cut back on spending on big-ticket items. Watch out for Whirlpool (WHR) or Tempur Sealy (TPX) shares to fall.
Automotive stocks will likely underperform. Dealers hold a mix of vehicles that are priced at the top end. Though General Motors (GM) stock performed well, it may start to dip from here.
Ford (F) risks re-testing its August low at around $9.50. Similarly, Stellantis (STLA) may retest its low of $15.11 and break below that.
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