Stock markets in the U.S. dropped for a fourth consecutive trading day mid-week, as investors evaluate jobs and inflation reports and monitor the progress of fiscal stimulus. Last Friday’s jobs report came in weaker than expected, with total nonfarm payrolls increasing by 194,000 in September, down 17% from August and far below economist projections for 475,000 new jobs. This marks the second month of deceleration of job growth. The weakness in the labor market recovery may complicate the decision by the Federal Reserve to begin tapering asset purchases before year-end. Even if the Fed goes ahead with announcing cutbacks to its bond-buying next month, this weak jobs report may remove pressure for the central bank to raise interest rates any time soon. A bright spot in the jobs report was the unemployment rate, which fell from 5.2% to 4.8%.

Meanwhile, Wednesday’s consumer prices (CPI) report reinforced the persistence of inflationary pressures in the economy. The consumer price index (CPI) increased 0.4% from August, and compared with a year ago, the CPI rose 5.4%, matching the largest annual gain since 2008. The numbers reflect shipping challenges, materials shortages, high commodities prices and rising wages, among other factors. The report will likely support the Fed’s guidance to soon start tapering its asset purchases. On the earnings front, key financial firms reported better-than-consensus earnings. JP Morgan beat expectations, and CEO Jamie Dimon said the bank released credit reserves of $2.1 billion, reflecting confidence in a strengthening economy. Asset manager BlackRock reported revenue and earnings beats, as well as a 21% increase in assets under management.  In the bond markets, interest rates have stabilized in the short term.  The 10-year Treasury was trading at a yield of 1.56% mid-week, after rising from a yield of 1.18% in early August.

Source: Bloomberg, Barron’s, Investors.com 

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