Economic Shifts: Job Revisions and Fed Minutes Impact Markets

Traders Raise Bets On Aggressive Rate Cuts As US Economy Sees 818,000 Jobs Revised Away: 7 ETFs React To Employment Data - VanEck Gold Miners ETF (ARCA:GDX), SPDR Gold Trust (ARCA:GLD)

Fed rate-cut expectations rose, pushing down the U.S. dollar and boosting utilities; gold reacted positively, while oil prices fell. The U.S. labor market's seemingly gravity-defying growth has been tempered by revisions to employment gains from April 2023 to March 2024. The American economy has seen 818,000 nonfarm payrolls, previously reported in official government statistics, vanish into thin air. This downward revision reduces the average monthly job gains to around 175,000, down from the originally reported 242,000. The most significant declines occurred in professional and business services (-358,000 for the year), leisure and hospitality (-150,000), retail trade (-129,000), and manufacturing (-115,000). On the other hand, there were upward revisions in private education and health services (+87,000) and transportation and warehousing (+56,400). The immediate takeaway from this data is that the U.S. labor market was not as hot as initially perceived, although job gains have still been solid, amounting to approximately 2.1 million annually through March 2024. Market Reactions: Dollar Falls As Rate-Cut Bets Increase, While Utilities, Gold Miners Rally The downward revision to annual payroll data has heightened expectations for aggressive Fed rate cuts, with speculators increasingly betting on a 50-basis-point cut in September. According to the CME Group Fed Watch tool, the probability of this outcome has risen to 34.5%, up from 29% the previous day. Traders are now fully pricing in that the federal funds rate will approach 4.25%-4.5% by the end of the year, implying a full percentage point cut from current levels. This shift in interest rate expectations triggered a negative reaction in the U.S. dollar, with the Invesco DB USD Index Bullish Fund ETF UUP erasing earlier gains. In contrast, gold prices reacted positively following the release, although the SPDR Gold Trust GLD remained in negative territory at 11:20 a.m. ET, down 0.2%. Growth-sensitive commodities like oil declined, with the United States Oil Fund USO falling more than 1% after the data release, and down 0.3% for the day. While the S&P 500 remained largely unchanged, notable sector movements emerged. The Financial Select Sector SPDR Fund XLF dropped sharply following the data release, while the Materials Select Sector SPDR Fund XLB and Utilities Select Sector SPDR Fund XLU saw gains. Within industries, gold miners experienced a turnaround, with the VanEck Gold Miners ETF GDX flipping from session losses to gains. Chart: 7 ETFs React To The Downward Revision In Employment Statistics Read Next: A Bar Of Pure Gold Is Now Worth $1 Million: What Can It Buy You? Image created using artificial intelligence via Midjourney. Market News and Data brought to you by Benzinga APIs

Dollar Falls As Fed Minutes Cement September Rate Cut; Bitcoin Rallies, Gold Miners Jump To 16-Month High - VanEck Gold Miners ETF (ARCA:GDX)

Some participants supported a rate cut as early as July, per FOMC minutes. Minutes from the July Federal Open Market Committee (FOMC) meeting have further solidified investors' expectations for a rate cut at the upcoming September meeting, as policymakers highlighted continued progress in disinflation. The U.S. dollar index, as closely tracked by the Invesco DB USD Index Bullish Fund ETF UUP, extended losses to a negative 0.3% for the day as of 3:40 p.m. ET, eyeing its fourth consecutive session of losses, driven by rising expectations of Fed rate cuts. The minutes revealed that some participants had considered the "plausible case" for lowering rates as early as the July meeting, a sentiment echoed by Fed Chair Jerome Powell during the subsequent press conference. The vast majority of participants noted that, if incoming data aligned with expectations, "it would likely be appropriate to ease policy at the next meeting." "Participants judged that recent data had increased their confidence that inflation was moving sustainably toward 2 percent," the minutes stated. Participants also agreed that labor market conditions were coming into better balance and that indicators tracking jobless claims and job separations deserved close attention going forward. Moreover, the moderation in the labor market is expected to continue contributing to disinflation, particularly in core nonhousing services prices. The path seems set for a rate cut in September, with Fed funds futures markets assigning a 61.5% probability for a 25-basis-point cut, compared to a 38% chance of a more significant 50-basis-point cut. The probability of a more aggressive half-point rate cut surged during Wednesday's session, influenced by a downward revision in annual nonfarm payroll estimates through March 2024 and supported by the FOMC minutes. Also Read: Why ARKK Stalled As QQQ Took Off: Harsh Lessons Over Past 5 Years Market Reactions Wall Street had a minimal reaction to the minutes, with indices broadly holding their session gains. The SPDR S&P 500 ETF Trust SPY, tracking the S&P 500 Index, was up by 0.4%, mostly unchanged after the minutes. The tech-heavy Nasdaq 100, as monitored through the Invesco QQQ Trust QQQ, also showed a similar behavior, holding up a 0.5% gain for the day. Sector-wise, materials extended their gains following the release of the minutes, with the Materials Select Sector SPDR Fund XLB rising 1.2% for the session. Gold prices inched higher to $2,515 per ounce, fueling a surge in mining-related industries. The SPDR S&P Metals & Mining ETF XME rose 0.4% after the minutes, pushing session gains to 1.9%. The VanEck Gold Miners ETF GDX rose by about 0.5%, on track to secure its fifth straight session of gains, and reaching levels last seen in April 2022. In the cryptocurrency market, Bitcoin BTC/USD spiked 1.4% in the hour post minutes, extending daily gains to 3% Read now: Traders Raise Bets On Aggressive Rate Cuts As US Economy Sees 818,000 Jobs Revised Away: 7 ETFs React To Employment Data Image created using artificial intelligence via Midjourney. Market News and Data brought to you by Benzinga APIs