Wall St rebounds as Fed rate cut bets intensify on weaker payrolls

NEW YORK: Wall Street’s main indexes bounced back on Monday after a sharp pullback in the previous session, buoyed by growing expectations of deeper Federal Reserve interest rate cuts following an unexpectedly weak jobs report.

At 11:39 a.m. ET, the Dow Jones Industrial Average rose 463.55 points, or 1.06%, to 44,052.13, the S&P 500 gained 74.56 points, or 1.20%, to 6,312.57 and the Nasdaq Composite gained 325.95 points, or 1.58%, to 20,976.08.

Both the S&P 500 and the Nasdaq were on track for their biggest single-day jump in more than two months.

This is in contrast to Friday, when a dismal US jobs report hammered the S&P 500 and sent it to its steepest intraday drop since May 27. The bleak data that also accompanied steep downward revisions for May and June forced market participants to amplify their bets for Fed rate cuts this year, noting signs of a weakening labor market.

“When you have a Fed that operates in a lagging sense, you’re going to have the market moving around as the data comes, that’s what we’re seeing with the weaker jobs report,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

Odds for a September rate cut now stand at about 84%, according to CME Fedwatch. Market participants see at least two quarter-point cuts by the end of this year.

Underscoring uncertainty, Trump fired Bureau of Labor Statistics Commissioner Erika McEntarfer the same day, accusing her of faking the jobs numbers.

“The revisions ... it brings a level of skepticism into the data sets,” Allianz Investment Management’s Ripley added.

Investors also weighed Fed Governor Adriana Kugler’s unexpected resignation, which could open the door for President Donald Trump to reshuffle the central bank’s leadership to his favor.

Trump has repeatedly threatened to fire Chair Jerome Powell, believing that rates should be much lower than they are.

Meanwhile, Tesla rose 1.2% after granting CEO Elon Musk 96 million shares worth about $29 billion.

All S&P 500 sub-sectors were trading in the green, with communication services leading gains with a 2% jump.

US factory orders tumbled 4.8% in June after an upwardly revised 8.3% increase in May, owing to a sharp drop in commercial aircraft orders.