Dow Jones up 300 points after weak jobs report lifts rate cut hopes
The Dow Jones rises on the hopes of an interest rate cut and trade negotiations with Mexico.
The Dow Jones is ironically surging because of disappointing news. A worse-than-expected May jobs report is raising hope among investors that the US Federal Reserve will cut interest rates as a result.
Dow Jones jumps on optimism about Fed interest rate cut
Fed chair, Jerome Powell, noted in a speech earlier in the week that the Fed could act to help the US economy.
‘As always, we [The Fed] will act as appropriate to sustain the expansion [of the US economy],’ said Powell.
In May, non-farm payrolls increased by only 75,000, much less than the predicted 185,000 jobs. After Powell’s comments and the lackluster employment statistics, investors are hopeful that the Fed will reduce interest rates in the future to help boost the economy.
Dow Jones rises on possible delay of US tariffs on Mexican goods
Investors were also encouraged by reports that the impending US tariffs on Mexican goods may be delayed. US President, Donald Trump, recently wrote in a Twitter post about a possible trade resolution.
‘If we are able to make the deal with Mexico, and there is a good chance that we will, they will begin purchasing Farm and Agricultural products at very high levels, starting immediately. If we are unable to make the deal, Mexico will begin paying Tariffs at the 5% level on Monday!’, tweeted Trump.
Mexico’s President, Andrés Manuel López Obrador, said that he is also hopeful that a trade agreement can be arranged.
‘I am optimistic that an agreement will be reached,’ said López Obrador.
Larry Adam, chief investment officer at Raymond James, believes that the Dow Jones will be more influenced by the US-Mexico trade talks than the Fed reducing interest rates.
‘An interest rate cut is being priced into the [US stock] market, but in order to go higher, you do need to get progress on the trade front because in the longer term that is the bigger issue for markets,’ said Adam.
Investors will be watching the Fed and the White House to see what actions Powell and Trump will take next.
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