John Hancock: Weekly Market Recap Week Ended August 2nd

Jobs slowdown

Stocks fell sharply on Friday after U.S. jobs growth slowed for the third month in a row and the unemployment rate rose to the highest level in nearly three years. July’s gain of 114,000 jobs came in below expectations and was far short of the 12-month average of 215,000. The unemployment rate rose to 4.3% from 4.1% the previous month.

Fed pivot outlook

The U.S. Federal Reserve again held off on cutting interest rates, but stocks climbed after Chair Jerome Powell said that an initial reduction could be on the table for its next meeting in mid-September if inflation continues to ease. The Fed also pivoted in its updated policy statement, which suggested that officials are attentive to concerns about labor market weakening in addition to inflation risks.

Yields slide

The shifting interest-rate outlook and fresh economic data fueled a price rally for government bonds, sending the yield of the 10-year U.S. Treasury bond to around 3.80% on Friday to the lowest level in eight months. Yields of 2- and 30-year notes also fell sharply for the week to levels not seen since late last year.

Policy divergence

While the U.S. Federal Reserve kept its key interest rate unchanged on Wednesday, two other central banks shifted their policies, with one cutting rates and the other raising them. The Bank of England cut its key rate for the first time in four years, while the Bank of Japan raised its benchmark rate, citing concerns about weakness in Japan’s currency, the yen.

Source: https://wmr.jhinvestments.com/