Wall Street Sighs In Relief As August Jobs Numbers Ease Recession Fears: Small Caps Outperform, Dollar Trims Weekly Losses

Wall Street breathed a sigh of relief Friday after the August jobs report signaled economic resilience, calming recession fears that had escalated following weak labor data in July and earlier this week.

The U.S. economy added 142,000 nonfarm payrolls in August, up from the previous month's downwardly revised 89,000 but falling short of the expected 160,000.

The unemployment rate dropped to 4.2%, meeting expectations, while wage growth showed strength. Average hourly earnings advanced by 0.4% to $35.21, surpassing the 0.3% forecast. On a year-over-year basis, wages rose 3.8%, beating July's 3.6% and the 3.7% consensus estimate.

Market Reactions

Initial market reactions saw the dollar swing lower and traders increasingly bet on a potential 50-basis-point rate cut from the Federal Reserve, driven by the headline payrolls miss. A deeper dive into the report — which revealed stronger wage growth and a dip in unemployment — helped ease recession concerns.

Expectations for a 50-basis-point rate cut surged to 59% by 9 a.m. in New York before retreating to 45%, as per CME Group‘s FedWatch tool.

• S&P 500: The S&P 500, tracked by the SPDR S&P 500 ETF Trust SPY, was down 0.19% shortly before 10 a.m. Friday.
• Tech Stocks: The Invesco QQQ Trust, Series 1 QQQ, which monitors tech-heavy Nasdaq stocks, is down 0.95%.
• Semiconductors: The iShares Semiconductor ETF SOXX is down 2.24%, pressured by a 9.65% slump in Broadcom Inc. AVGO following its earnings report.
• Small Caps: The iShares Russell 2000 ETF IWM gained 0.14%, buoyed by strength in smaller companies.
• Dollar Index: The Invesco DB USD Index Bullish Fund ETF UUP rose 0.25%, reversing early losses.
• Treasury Yields: Yields on 10-year Treasury notes edged up by 2 basis points to 3.75%.
• Gold: The SPDR Gold Trust GLD fell 0.21%, as the dollar firmed and risk sentiment improved.

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Illustration created using artificial intelligence via Midjourney.