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10 May 2024 | FXGT.com

U.S. Stocks Surge as Jobless Claims Rise, Increasing Odds of Fed Rate Cuts

  • US Stock Indexes Performance: The Dow extended its gains for the seventh consecutive day, climbing by 0.90% on Thursday, to reach a new 5-week high. This rally is the most significant since December, driven by softening job market data and expectations that the Federal Reserve may initiate rate cuts later this year.
  • Jobless Claims Data: Stocks rallied following the report of higher-than-expected U.S. jobless claims, which could help alleviate inflation pressures and support the case for future Federal Reserve rate cuts. The jobless claims increased to a seasonally adjusted 231,000 last week, surpassing economists’ expectations of 215,000.
  • April Jobs Data: Last week’s Non-Farm Payrolls data also missed forecasts, with the U.S. economy adding only 175,000 jobs in April, below the anticipated 240,000. These figures suggest potential cooling in the labour market.
  • Federal Reserve Stance: Despite recent increases in jobless claims, Federal Reserve officials have maintained a cautious stance on rate cuts. They emphasize the need for more significant progress towards the Fed’s 2% inflation target and clearer signs of loosening in the job market before any policy easing.
  • Interest Rate Expectations: Following the jobless claims report, Fed funds futures are pricing in possibly two 25 basis point rate cuts for the year, adjusted from earlier expectations of only one, with the initial reduction anticipated in either September or November.
  • Upcoming Economic Data: Market focus now shifts to next week’s producer and consumer price index readings, which are crucial for further insights into inflation trends and potential Fed actions.
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