Wall Street rallied in a whipsaw Friday after looking deeper into the nuances of a surprisingly strong report on the U.S. job market.
Wall Street hates high interest rates because they knock down prices for all kinds of investments. And even though the job market hasn't faltered yet, despite the Fed pulling its main interest rate to the highest level since 2001, high rates work to extinguish high inflation by slowing the entire economy. That raises the risk of a recession down the road.
Among the potentially encouraging signals for the Fed: Workers’ average wages rose at a slower rate in September than economists expected. While that’s discouraging for workers trying to keep up with inflation, it could remove some inclination by companies to keep raising prices for their products. That raises the stakes for upcoming reports next week on inflation at both the consumer and wholesale levels. They’re the next big data points coming before the Fed makes its next announcement on interest rates on Nov. 1.
The day's whiplash for stocks meant the S&P 500 went from a loss of 0.9% to a gain of as much as 1.5% That swing of 2.4 percentage points is the largest since March, when high interest rates triggered a crisis in the banking industry that sent financial markets around the world into turmoil. Next week will see the unofficial start to earnings reporting season for the S&P 500, with Delta Air Lines, JPMorgan Chase and UnitedHealth Group among the big companies scheduled on the calendar.
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