Implications of Steady Wage Growth on Federal Reserve Policies


Simpler Trading Team

Jul 07th 2023  .  4 min read

The Market Open: Morning Murmurs

The early morning trading scene on Wall Street exhibited a picture of hesitancy as market participants grappled with the latest jobs report. The major averages showed a slight dip in early trading, reflecting a cautious stance amid indications of the Federal Reserve returning to rate hikes in the upcoming months. This sentiment was echoed in the futures and overnight markets, signaling a consensus on the impact of healthy hiring and wage growth figures on the Fed’s monetary policies.

The Market’s Heartbeat

Today, the stock market showed varied results, with certain areas doing well while others struggled. The Energy, Materials, Consumer Discretionary, Industrials, and Financial sectors performed strongly, outdoing other sectors and suggesting good opportunities for investment. However, the Health Care, Consumer Staples, Real Estate, and Utilities sectors didn’t do as well, showcasing the wide range of outcomes in the market.

Star Performers and Underachievers

In the stock market today, several companies caught the eye. Even though Microsoft (MSFT) faced a minor drop, it still kept major investors interested. On the other hand, Caterpillar (CAT) and 3M (MMM) moved up with notable gains, proving their power in driving market trends. But, even large companies like Merck (MRK) and Amgen (AMGN) experienced down days, giving a clue about the direction of money flow.

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Steady Wage Growth: Will The Fed Raise Again?

Today’s economic snapshot was quite interesting. Although people are still getting hired, it’s happening at the slowest rate we’ve seen in two and a half years. Unemployment did drop slightly to 3.6%, indicating consumers are still pretty stable. However, the slower job creation could mean the job market isn’t as strong as it once was.

Wages are growing at a consistent 4.4% compared to last year, and this has caught the attention of the Federal Reserve because it could affect the cost of things we buy. Now, everyone’s waiting for the June CPI (Consumer Price Index) report, expected on July 12. This report is likely to influence the Federal Reserve’s decision on whether or not to raise interest rates later this month.

The Treasury bond yields, which also influence interest rates, have gone up. This is especially noticeable for the 10-year Treasury note yield. Despite the recent job numbers, it seems investors still expect a hike in interest rates, as reflected in recent trends. This shows that the economy is still chugging along, despite some changes in the broader landscape.

Market Close: Evening Enigma

The Dow Jones had a turbulent ride, opening at 33,734.88, reaching a high of 34,036.38 and a low of 33,716.75. By the day’s end, it lost 187.38 points, a 0.55% decline, and the final tally was recorded at 16:14:12.

The S&P 500 also experienced a choppy session. The index commenced trading at 4,399.63, flirted with a high of 4,440.44, and stooped to a low of 4,397.13. When the dust settled, it was down 11.96 points, reflecting a 0.27% decrease from the previous day’s close. The last trade was executed at 15:59:56.

The Nasdaq had its own story, with an opening bell figure of 13,660.72. It aimed for the sky, reaching a high of 13,804.51, but also dipped to a low of 13,656.74. A reduction of 18.33 points, or a 0.13% slide, was observed as the final gavel fell at 16:14:08.

However, it wasn’t all red across the board. The Small Cap 2000 showed its mettle, starting the day at 1,862.05 and moving between 1,878.20 and 1,843.05. It bucked the day’s downward trend by closing up 22.38 points, a robust gain of 1.22%. The closing bell rang at 15:59:57 for this index.

Finally, the S&P 500 VIX – often considered a fear gauge – initiated the day at 14.83, rose to 16.06, and declined to 14.33. It ended the day down by 0.61, a 3.95% decrease, with the day’s final reading taken at 16:13:16.