GDP Revision And Jobs Data Shake Investor Sentiment In September

U.S. stocks closed with mixed results, as the DOW and S&P ended slightly higher, while the Nasdaq experienced a slight dip.

The week was marked by a wealth of data, with the GDP and jobs numbers taking centre stage.

The government reported that Gross Domestic Product (GDP) increased at an annualized rate of 2.1% in the last quarter, as revealed in its second estimate for the April-June period.

This marked a revision from the previously reported 2.4% growth rate just last month. Economists surveyed by Reuters had anticipated that GDP for the second quarter would remain unchanged.

The Personal Consumption Expenditures price index (PCE), excluding food and energy rose by 3.7%, a slight decreased from the previously reported 3.8% rate. This marked a significant slowdown from the 4.9% pace recorded in the January-March quarter.

Nonfarm payrolls added 187,000 jobs last month, following a rise of 157,000 in July. The market was expecting a rise of 170,000. In contrast, the unemployment rate rose to 3.8% from 3.5% in July.

With these data, the market is now expecting less than a 50% chance of another interest rate hike this year and is calling for a rate cut in May instead of June.

For the week, the Dow climbed 1.43%, the S&P gained 2.5% and the Nasdaq rose by 3.67%.

Here are the closing levels for Friday, September 1st, 2023: 

Last Change %Change
DOW JONES 34837.71 +115.80 +0.33%
S&P 500 4515.77 +8.11 +0.18%
NASDAQ 14031.81 -3.16 -0.02%
U.S. 10Y 4.18%
VIX 13.09 -0.48 -3.54%

This marks a promising start to September following a lackluster August.

It is worth noting the intriguing shift in market sentiment: historically, positive GDP data has triggered rallies, but this time, the market rallied in response to lower-than-expected GDP figures.

This reflects the current investor mindset, where “bad” economic news is viewed as “good.” Investors appear to be growing more optimistic as the end of the rate-hiking cycle nears, with the possibility of a near-future cut (potentially in May) further fuelling their enthusiasm.

From a technical perspective, both the S&P and Nasdaq have surpassed their 50-day moving averages, a positive sign. However, recent fluctuations may be attributed to increased volatility, so it is crucial to maintain these upward trends.

The moderation in jobs data could potentially lead the Federal Reserve to pause during their upcoming meeting, which is seen as a positive development. On the downside, discussions of a recession are resurfacing.

It will be intriguing to observe how the market responds if further signs of economic slowdown indeed materialize into the onset of a recession. Friday’s weak closing could be a cautionary signal for bullish investors who may be prematurely assuming that all is well once again.

Source: CBOE, Bloomberg

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable U.S. bank exceeding 20 years.

Risk Disclosure
Trading in financial instruments involves high risks due to the fluctuation in the value and prices of the underlying financial instruments. Due to the adverse and unpredictable market movements, large losses exceeding the investor’s initial investment could incur within a short period of time. The past performance of a financial instrument is not an indication of its future performance. Investments in certain services should be made on margin or leverage, where relatively small movements in trading prices may have a disproportionately large impact on the client’s investment and the client should therefore be prepared to suffer significant losses when using such trading facilities.

Please ensure you read and fully understand the trading risks of the respective financial instrument before engaging in any transaction with Doo Prime’s trading platforms. You should seek independent professional advice if you do not understand any of the risks disclosed by us herein or any risk associated with the trade and investment of financial instruments. Please refer to Doo Prime’s Client Agreement and Risk Disclosure Statement to learn more.

[Disclaimer]
This information is addressed to the general public solely for information purposes and should not be taken as investment advice, recommendation, offer, or solicitation to buy or sell any financial instrument. The information displayed herein has been prepared without any reference or consideration to any particular recipient’s investment objectives or financial situation. Any references to the past performance of a financial instrument, index, or a packaged investment product shall not be taken as a reliable indicator of its future performance. Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners, and their respective employees, as well as managers, make no representation or warranties to the information displayed and Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners and their respective employees, as well as managers, shall not be liable for any direct, indirect, special or consequential loss or damages incurred a result of any inaccuracies or incompleteness of the information provided. Doo Prime and its holding company, affiliates, subsidiaries, associated companies, partners, and their respective employees, as well as managers, shall not be liable for any direct, indirect, special, or consequential loss or damages incurred as a result of any direct or indirect trading risks, profit, or loss arising from any individual’s or client’s investment.

Share the Post:

Related Posts