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Why Disappointing US Jobs Report Lit Up a Fire Under Stocks?

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Disappointing US jobs report

US non-farm payroll data was released today, indicating just 75,000 job additions in May. The figure missed economists’ expectation of 180,000, and payroll additions for March and April were revised down substantially to 153,000 and 224,000 from 189,000 and 263,000, respectively. Wage growth also missed economists’ estimate, with average hourly earnings rising 3.1% year-over-year in May. Unemployment remained at 3.6%, in line with the market expectation.

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Market reaction

Following the jobs report, the ten-year Treasury yield (TLT) dropped to its lowest level since September 2017, and then turned positive. As of 11:10 AM Eastern Time today, the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and NASDAQ Composite (QQQ) had risen 1.25%, 1.14%, and 1.74%, respectively.

The Fed could cut rates

Comments from several Fed officials over the last few days have signaled that the Fed could cut rates. Markets were eagerly awaiting the jobs report to see whether the slowdown has impacted US employment. The weak jobs data has spurred recession fears among market participants.

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