US stocks wobble as Wall Street wrangles with whether job market is too weak

US stocks are falling on Friday as Wall Street questions whether the US job market has slowed by just enough to convince the Federal Reserve to cut interest rates soon to help the economy, or by so much that a recession may be on the way.

After jumping to an early gain, the S&P 500 erased it and fell 0.6 per cent below the all-time high it set the day before. The Dow Jones Industrial Average was down 334 points, or 0.7 per cent, as of 10.45am Eastern time, after losing its own early gain of 148 points. The Nasdaq composite fell 0.5 per cent.

The action was much stronger in the bond market, where Treasury yields tumbled following the latest weaker-than-expected update on the US job market. That raised expectations for a cut to rates by the Fed later this month. While the data on the job market is disappointing, it is still not so weak that it is screaming a recession.

The slowdown in the job market could bolster the case for the Federal Reserve to cut its main interest rate, which Fed Chair Jerome Powell has already signalled as a possibility. An announcement of a rate cut at the Fed’s next meeting on September 16-17 could reduce other borrowing costs in the economy, including mortgages, vehicle loans and business loans.

While such cuts to interest rates can kick-start the economy and job market, they can also accelerate inflation, another big concern for the US central bank.

Last month’s grim July jobs report, which showed job gains of just 73,000 and included massive downward revisions for June and May, sent financial markets spiralling. Following that report, US President Donald Trump announced that he had fired the head of the agency that compiles the monthly data.

  

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