Wall Street recovers as inflation numbers await
The New York Stock Exchange rises, with the S&P 500 and Russell 2000 up nearly 2% since Thursday, benefiting from a mixed jobs report and statements from some Fed members.
Job creation came in well above expectations with 261,000 against an expected 200,000, but unemployment rose more than expected to 3.7% against the previous 3.5% and 3.6% expected. The larger-than-expected increase in unemployment suggests that monetary policy tightening may ultimately be less than expected as it begins to affect the labor market, but more data will be needed on this.
Also, the presidents of the Richmond and Boston Fed fueled speculation that the Fed’s monetary tightening was likely to ease, but nevertheless hinted that the terminal rate could be higher.
Wall Street may continue to recover in the short term, but the release of inflation numbers on Thursday poses a threat. CPI is expected to rise 0.6% month-on-month in October, from 0.4% in September, but the Atlanta Fed estimates it is up 0.8%. A higher than expected inflation will largely dampen expectations of a slowdown in monetary policy tightening from the Fed, which will put pressure on the stock markets.
Stock markets will also closely monitor the results of the mid-term elections, but the impact seems very uncertain. For Wall Street, the best thing is probably a divided Congress to limit the larger excesses of the White House, especially in this period of hyperinflation, as the Biden administration adds fuel to the fire by running deficits.
Russell 2000 Daily Price Chart – Key Levels