Today has been a whirlwind in the markets, and there are a few key factors that contributed to the sell-off.
Let me explain what I’m seeing.
Jobs Report and Economic Indicators
The latest jobs report came in weaker than expected, with fewer jobs added in July and an unexpected rise in the unemployment rate to 4.3%.
This data feeds investor worries that the Federal Reserve’s “higher for longer” interest rate policy might push us toward a recession.
While the Fed held steady on rates earlier this week, there won’t be an August meeting, so the soonest they could cut rates would be September. Jerome Powell has hinted at the possibility of a rate cut in September, which is earlier than the previously stated November timeline.
The first question that comes to my mind when I hear this: Does the Fed know something we don’t, or are they playing politics?
In addition to the weak jobs numbers, Intel (INTC) announced 15,000 layoffs — a full 15% of their workforce — along with a missed earnings forecast and a suspended dividend.
Meanwhile, Amazon (AMZN) also disappointed with its sales guidance, leading to a 12% drop, although it’s now recovered some of those losses.
Meanwhile, wages have dropped even as inflation continues to rise, even if it is at a slower pace. All of this paints a less-than-rosy picture for the economy.
Market Reaction and Investor Sentiment
The market doesn’t like uncertainty, and today’s news brought plenty of it.
As a result, we saw major indices — the Nasdaq, Dow, and S&P 500 — take a dive.
The tech-heavy Nasdaq fell into correction territory, more than 10% below its recent high.
The VIX, a measure of market volatility, spiked to nearly 30, its highest level since March of last year.
A high VIX usually indicates fear in the market, but as the saying goes, “When the VIX is high, it’s time to buy.”
This might present a buying opportunity, but we’ll need to see how things unfold next week.
Looking Ahead
Despite today’s nosedive, it’s important to remember that the S&P hasn’t yet dropped below its June low.
This could all just be another pullback, similar to what we saw heading into April before the market turned around again.
However, with Kamala Harris moving up in the polls and economic reports not meeting expectations, there’s still plenty of uncertainty.
In times like these, it’s crucial to stay informed and not let fear drive your decisions. We’ll keep an eye on the developments and look for opportunities amidst the chaos.
Stay tuned, and keep your trading strategies flexible.
— Geof Smith
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