Dow Jones Closes Lower On Weak Jobs Report
On Friday, the Dow Jones Industrial Average closed lower as the jobs report missed analysts’ expectations. This is something that the Fed doesn’t want to see as it decides whether or not it should implement a rate hike in December. What investors were also worried about was the upcoming presidential election between Hillary Clinton and Donald Trump. The way the market perceives each candidate is the direction the market will move in. Either way, all markets including the Dow will be trading with high volatility until election day. The Dow Jones closed lower by 0.24% to 17,888.28.
Jobs Dilemma
There were 161,000 jobs added in the U.S. for the month of October. This was under the expected amount of adding at least 175,000 jobs. This broadened investors fears that not many businesses are hiring as much as they should be. This leads to the notion that the Fed may pull back on raising interest rates in December because of this weaker than expected data. This may have caused the Dow to close lower on the initial report but looking in deeper into the details shows a few positives. The unemployment rate has stayed steady at 4.9%. This is a positive, because after the amount of jobs added this number has stayed the same. Had the rate increased to 5% it could have been seen as a huge negative. By the rate staying steady it shows that hiring is keeping up pace with the economy. The second positive to come out of the jobs report is the fact that wage growth has increased by a huge margin. The Bureau Labor of Statistics released data that average hourly earnings had climbed by $0.10 cents. This is a 2.8% increase annually for private sector workers. This is the largest annual rise in wage growth since 2009. Still, the lower than expected jobs addition for the month of October probably overshadowed the good in this report.
Election Movement
With the election taking place this Tuesday, investors on Friday were shaken about who would be next in line to take the presidency role. It seems that investors are worried about what kind of policies will be implemented and how the stock market will react with such changes. Thus far, there has been a certain type of correlation depending upon who is elected. If Trump is elected, there is a huge form of uncertainty surrounding the type of policies he will implement. In that case, the Dow has traded lower with polls favoring Donald Trump. When the Hillary email issue came up from the FBI director, the Dow Jones traded lower because of it. On Sunday night, there was late-breaking news that FBI Director Comey cleared Hillary Clinton of any charges with respect to the e-mails. This is important because as soon as this news broke, the Dow Jones futures value gained into positive territory up by 1.22%. This leads to the notion that Hillary being elected would be a huge positive for the Dow.
Additional Burden
The weaker than expected jobs report, and the election issue were just a few things holding the Dow from posting any gains. Another issue was the reaction to the VIX or volatility index. This index measures the amount of fear from investors with respect to a multitude of issues. In other words, the VIX measures the amount of fear in the marketplace at any given moment. It is an important indicator for determining the Dow’s next move. The VIX on Friday spiked by 3.76% to 22.9. With the election fear taking hold, the VIX has gone up by more than 40% this week alone. This makes for a fearful market, where traders don’t feel comfortable enough to hold their current positions. This means that the Dow won’t trade normally until after the election is over. The next thing to consider is where the Dow will trade thereafter is dependent upon how the Fed acts with respect to interest rates. A rate hike will likely cause the Dow to trade lower, and this wouldn’t be good at all for those traders who are in the bullish camp.
Disclosure: None.
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