Soft Labor Data Eases Inflation Fears

"U.S. inflation data showed a better-than-expected improvement in July. On Thursday, the S&P 500 rose 0.7% to an all-time high close of 7,798.99."

"Investors, traders and speculators pushed interest rates lower and stocks higher after softer-than-expected incoming data suggested there's little if any inflation pressure from the labor market right now."

"The bright side of the weaker-than-expected result is that it could keep pressure off inflation, which has been accelerating worldwide because of jumps in oil prices caused by the war with Iran. And now that oil prices are back below where they were before the war, if inflation slows in upcoming months, the Federal Reserve may feel less need to raise interest rates several times this year. That would be a relief for investors, who tend to love lower interest rates because they can give the economy a boost by making it less expensive for U.S. households and businesses to borrow money and spend."

"That's good for the economy, but it was also short of the 100,000 jobs that economists expected and a slowdown from May's hiring pace. The bright side of the weaker-than-expected result is that it could keep pressure off inflation...if inflation slows in upcoming months, the Federal Reserve may feel less need to raise interest rates several times this year. That would be a relief for investors, who tend to love lower interest rates because they can give the economy a boost."

"The bright side of the weaker-than-expected result is that it could keep pressure off inflation, which has been accelerating worldwide because of jumps in oil prices caused by the war with Iran. And now that oil prices are back below where they were before the war, if inflation slows in upcoming months, the Federal Reserve may feel less need to raise interest rates several times this year. That would be a relief for investors, who tend to love lower interest rates because they can give the economy a boost by making it less expensive for U.S. households and businesses to borrow money and spend."

"The stock market also saw support after Tuesday’s US March PPI report of +0.5% m/m and +4.0% y/y, which was weaker than market expectations of +1.1% m/m and +4.6% y/y."

"Also, today’s US economic news was better than expected and supportive of stocks. Weekly initial unemployment claims unexpectedly fell by -9,000 to a 2.5-month low of 202,000, showing a stronger labor market than expectations of an increase to 212,000."

"The S&P 500 closed barely higher on Friday, supported by cooling inflation data."

"Expectations of monetary easing have grown after July's weak jobs report, with Fed Chair Jerome Powell acknowledging labor market risks at the Jackson Hole symposium."

""This reading is going to be a little dilutive to this stagflation narrative, and it is going to restore to some extent policy flexibility from the Fed.""