Why did the S&P 500 and the Nasdaq rally after the weaker-than-expected payroll report?

The latest US job report, published last Friday, has shown the following data:

  • 175,000 US jobs were added in April, well below the expectations of 243,000 jobs
  • total jobs in the US increased by 1.8% over the last year. This data is the lowest YoY growth rate since March 2021
  • the US Unemployment Rate went up to 3.9% in April from 3.8% in March. The highest percentage since January 2022
  • the US Job Openings reading was down to 8.49 million, the fewest since February 2021.

The markets responded to the latest negative US job report data with a positive performance of the S&P 500 and the Nasdaq which went up 1.26% and almost 2% respectively.

This is the typical scenario when bad news for the economy is good news for the stock market.

Investors are celebrating the cooldown of the US job market because they believe that the Federal Reserve will start cutting interest rates sooner than previously expected.

There has been a shift in Fed Funds Rate expectations after the jobs report, with traders now pricing in two rate cuts in 2024. The first one in September and the second one in December.

The positive momentum of the stock market is also supported by the strongest company earnings season in nearly two years.

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Author: Federica Montella
eToro Popular Investor, food lover and blogger. Stock trader and Popular Investor at eToro. I am on a mission to find the best restaurants and food to eat.