Dow Plummets as Investors Await Next Fed Move

Facts

• The Dow Jones Industrial Average (Dow) stock index plummeted by over 500 points, or 1.5%, by mid-Thursday in response to a better-than-expected US job growth report; the S&P 500 and Nasdaq also dropped 1.3% and 1.5%, respectively. Stocks recovered slightly by the closing bell to around a 350-point end-of-day drop.¹
• According to payment processing firm ADP, private sector jobs increased by 497K in June, the largest gain since July 2022 and more than double the Dow consensus estimate of 220K and much more than the 267k additional jobs in May.²
• Alongside the jobs report, which coincided with a survey showing more Americans filed for unemployment, estimates of a 95% chance of another quarter-point Federal Reserve (Fed) interest rate hike also spooked investors. The move will likely come at the Fed's next meeting on July 26.³
• The Fed has hiked interest rates from near zero to 5.25% over the past 16 months, though stocks have recovered well. For example, the S&P is up 25% since last September, when rates were approximately 200 basis points lower.¹
• Stocks hit particularly hard included Exxon Mobil due to lower natural gas profits and oil refining margins, as well as chipmakers Qualcomm and Intel due to US sanctions on Chinese imports. Meta Platforms' stock fell as well despite the launch of its Threads app.³

Sources: ¹Forbes, ²CNBC, and ³New York Post.

Narratives

• Left narrative, as provided by New York Times. Today's recession alarmists are similar to the old-school gold standard obsessives, except this time it's Silicon Valley's elite who are pushing the conspiracy that government spending can't help with inflation. The facts are that the US still hasn't hit a recession and, although not quite where we want it to be, inflation is going down — even alongside a strong job market. The economic data coming from the government is real, but it's pointing to the opposite of the gloomy picture being painted.
• Right narrative, as provided by New York Post. Despite left-wing rhetoric about 'Bidenomics,' the facts are that the stock market has shrunk 10% since 2022, the average monthly mortgage payment has jumped from $1,100 to $2,200, and, even as inflation slowly goes down, the prices of goods have been so deeply embedded in the economy that regular Americans will feel them for a long time. This all stems from Biden's original $1.9T American rescue plan but has worsened under his continued reckless spending as well as rising interest rates.

Predictions