The aBP Weekly: The U.S. Lost Jobs, So Why Did Stocks Hit Records?
- Felix Ouma
- 4 days ago
- 6 min read
Wall Street received what would normally be considered bad economic news this week. The U.S. economy unexpectedly lost 23,000 jobs in July, sharply missing expectations for roughly 80,000 new jobs. Yet instead of falling, stocks rallied. The S&P 500 closed at a record high, while the Nasdaq, Dow Jones and small-cap Russell 2000 all finished the week firmly higher.
The reaction may appear contradictory, but it reflects one of the most important relationships in financial markets today: what is bad for the economy can sometimes be good for stocks when it changes expectations for interest rates.
Investors interpreted the weak employment report as evidence that the U.S. labor market is cooling. That reduces some of the pressure on the Federal Reserve to raise interest rates further as it continues fighting inflation. Treasury yields subsequently fell, technology stocks rallied, and investors pushed the S&P 500 to another record. For investors, however, the bigger question is whether the economy is achieving the slowdown markets want or moving toward something more concerning.
