- U.S. stock futures were down marginally by 0.2% this morning following another all-time high by the S&P 500 index yesterday. Macro data is starting to look weaker—consumer spending was down in May and the job market is getting worse for employees. That suggests the Fed may cut rates in September, analysts say, which would be good for stocks.
Consumer spending is weakening. The job market is getting worse for workers. And U.S. stock investors are loving it.
The S&P 500 rose 0.52% yesterday, hitting an all-time high for the second day in a row. S&P 500 futures were down marginally by 0.2% this morning, premarket, indicating that investors don’t anticipate anything dramatic like a mass selloff.
Why the joy amid so much impending misery? Because the deteriorating macro picture suggests that the U.S. Federal Reserve may cut interest rates sooner rather than later. And cheap money is usually good for stocks.
The stock market is climbing “the wall of worry,” as Goldman Sachs put it in a note seen by Fortune. A key event will be this week’s U.S. jobs report.
Pantheon Macroeconomics expects it to be not-great: “We’re looking for a 100K increase in June nonfarm payrolls, due Thursday, with private jobs rising at the same pace, as well as an uptick in the unemployment rate to 4.3%, from 4.2% in May. This would signal the labor market is cooling, albeit too slowly for the FOMC to rush ahead and ease policy this month, before it has had more time to gauge the size of the uplift to inflation from the tariffs,” Samuel Tombs and Oliver Allen told clients.
Consumer spending is softening too. It decreased by 0.3%, month-on-month, in May.
If inflation remains low, the Fed may move in September, Goldman said.
“We are pulling forward our forecast for the next [Fed rate] cut to September. We had previously expected a cut in December because we thought that the peak summer tariff effects on monthly inflation would make it awkward to cut sooner. But the very early evidence suggests that the tariff effects look a bit smaller than we expected, other disinflationary forces have been stronger, and we suspect that the Fed leadership shares our view that tariffs will only have a one-time price level effect. And while the labor market still looks healthy, it has become hard to find a job, and both residual seasonality and immigration policy changes pose near-term downside risk to payrolls,” Jan Hatzius and his team told clients in a note.
Here’s a snapshot of the action prior to the opening bell in New York:
- S&P 500 futures were down 0.2% this morning, premarket.
- The S&P 500 rose 0.52% yesterday, hitting an all-time high for the second day in a row.
- Japan’s Nikkei 225 sold off by 1.24% this morning.
- Hong Kong’s Hang Seng was also down, by 0.87%.
- The Stoxx Europe 600 was headed down marginally in early trading.