US Stock Markets React to Strong Earnings and Mixed Jobs Data

The United States stock markets opened November on a positive note, largely propelled by strong earnings results from tech giants like Amazon and Intel. Despite the uplifting corporate earnings, the most recent jobs report provided a mixed economic perspective. Throughout the week, the Nasdaq 100 showed a decline of 1.57%, while the S&P 500 fell by 1.37%, and the Dow Jones experienced a slight reduction of 62 points, equating to a 0.15% loss.

Employment Report Highlights

October’s non-farm payroll statistics reflected the addition of merely 12,000 jobs to the US economy, significantly underperforming compared to the anticipated 113,000 jobs. This shortfall can partially be attributed to disruptions caused by hurricanes and labor strikes, which resulted in a drop of 37,000 positions. Furthermore, the headline figures revealed downward revisions summing up to 112,000 jobs over the preceding two months. However, offering a contrasting perspective, the household survey, expected to be less impacted by the hurricane activities, reported a stabilized unemployment rate of 4.1%.

Upcoming US Election Impacts

With the US election approaching swiftly, prediction and betting markets are showing a slight inclination towards a Trump victory. Nonetheless, recent polling data over the weekend signaled a diminished probability for a Republican sweep, falling to approximately 36% from a 48% likelihood last week. Concurrently, the chance of a Harris-led win combined with a divided Congress hovers around 27%.

The vote counting is set to commence by Wednesday mid-morning Sydney time. In the absence of a central national election counting body, numerous media organizations such as Associated Press (AP), Fox News, and a coalition comprising ABC, CBS, CNN, and NBC will undertake the responsibility of tabulating votes in real time, presenting projections on a state-by-state basis.

Expected Timeline for Election Results

The timeline for declaring the election winner will largely depend on the vote-counting pace. For instance, Barack Obama’s 2008 victory was promptly confirmed within hours, whereas Donald Trump’s 2016 win was declared on election night despite the competitive nature of the race. Conversely, Joe Biden’s 2020 victory announcement took four days due to an overwhelming influx of Covid-19 driven mail-in ballots. Ultimately, the results may become apparent within a few hours following the end of the election day or could extend over several subsequent days.

Federal Monetary Policy Moves

At its September assembly, the Federal Open Market Committee (FOMC) opted for a 50 basis point reduction in interest rates, bringing them to a range between 4.75% and 5.0%. This marked the Federal Reserve’s (Fed’s) foremost rate decrease in over four years, primarily aimed at bolstering the US labor market.

Chair of the Fed, Powell, in the press statement following the rate cut, mentioned, “This decision mirrors our solidifying confidence that with an apt recalibration of our policy framework, enduring robustness in the labor market can coexist with moderate growth and inflation aligning sustainably towards the targeted 2%.”

Subsequent to the September rate reduction, inflation metrics have stayed tepid, while economic activities along with the labor market have displayed unexpected vigor. This stream of robust data has gradually reshaped traders’ outlooks, resulting in fewer speculations of imminent aggressive Fed rate cuts by the year’s end.

The prevailing sentiment suggests the likelihood of another 25 bp cut in the impending FOMC meeting, succeeded by a similar reduction in December as the Fed steadily transitions towards a less restrictive monetary policy stance.