US stocks close mixed as investors asses implications for Fed policy after monster July jobs report

  • US stocks closed mixed on Friday after July’s strong jobs report fought back recession worries.
  • The US added 528,000 new jobs in July, about double expectations as the unemployment rate fell to 3.5%.
  • The strong employment gains will put pressure on the Fed to continue with its interest rate hikes.

US stocks closed mixed on Friday as investors assessed the catch-22 scenario in which a strong economy likely means more interest rate hikes from the Federal Reserve.

The US economy added 528,000 new jobs in July, which was more than double the consensus economist estimate of 250,000 new jobs. The strong gains were driven in part by the hospitality sector and resulted in the unemployment rate falling to 3.5% from 3.6%.

The US economy has now fully reclaimed all the jobs lost during the COVID-19 pandemic.

While the jobs report is good news for the US economy, as it bucks the idea that a recession is imminent, it also puts pressure on the Federal Reserve to continue with its aggressive interest rate hikes as it attempts to tame inflation. The Fed’s next FOMC meeting where it will determine what to do with interest rates is in late September.

Here’s where US indexes stood at the 4:00 p.m. ET close on Friday:

The July jobs report also showed a better-than-expected gain in average hourly earnings, with a 0.5% increase to $32.17, ahead of estimates for a gain of just 0.3%.

Also putting pressure on stocks was the Democrats’ Inflation Reduction Act, which seems to now have full support of all 50 Senate Democrats needed to pass the reconciliation bill. The agreement made Thursday evening between Krysten Sinema and Chuck Schumer scraps the closing of the carried interest tax break, and instead imposes a 1% excise tax on stock buybacks.

Corporate stock buyback programs have long been seen as a big source of demand for US equities, and JPMorgan estimated earlier this year that stock buyback programs would hit a record $1 trillion in 2022. A 1% tax may not be high enough to fully deter the practice, as dividends get taxed at a higher rate, but it could ultimately reduce demand for stocks. 

European gas prices are on track to rise for the third consecutive week as Russia continues to threaten cutoffs in its supply. Meanwhile, Russia has taken the second top spot in exporting oil to India as it sells the commodity at a discounted price. 

Another obscure China-based stock saw head-spinning gains on Friday, with Magic Empire surging more than 5,000% in its IPO debut. The financial services company saw its market value peak at near $5 billion on Friday, despite it generating only $2 million in annual revenue last year.

West Texas Intermediate crude oil fell 0.35% to $88.23 per barrel. Brent crude, oil’s international benchmark, rose 0.07% to $94.19. 

Bitcoin fell 1.07% to $22,933. Ether prices rose 1.22% to $1,681.

Gold fell 0.88% to $1,790.80 per ounce. The yield on the 10-year Treasury rose 14 basis points to 2.84%.

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