We are looking at the major US stock averages rallying and this does come after the release of the June jobs report.
Now non-farm payrolls did come in below expectations, but the unemployment rate did fall to 4.2%.
Meanwhile, speaking in Portugal yesterday, Fed chair wars saying inflation risks are cooling, but reiterated his commitment to restoring price stability and also.
Hitting the central bank's target for inflation, his comments enforce reinforced expectations that policymakers are in no rush to raise rates, and this does come as the jobs report was released.
Now US stocks easing to kick off the month of July as we did see a selloff on chip makers.
Well joining us this morning to weigh in is Dale Summers.
CEO and founder of RDS Well, Dale, good morning.
Thank you so much for joining us.
Well, we did get the release of that US jobs report, and it was a mixed report because we saw labor participation fall and the non-farm payrolls come in weaker than expected.
So what do you make of the market reaction and are you also in the camp that we will stay unchanged for rate hikes?
Yeah, good to be with you this morning, Remy.
You know, let's catch the viewers up here just for a minute.
If they're tuning in and seeing a weaker than expected jobs report, yet a sharply higher market this morning, sometimes maybe that doesn't add up.
It seems like, wait a minute, the market's weaker, or excuse me, the labor market is weaker, but the stock market likes that.
How is that to be the case?
And this all revolves around what the Fed will do with interest rates, a stronger than expected labor market, perhaps.
Started the sell-off in June when we got the June report that told us that May's jobs was perhaps a little bit stronger than we had expected.
Now we see the June jobs report come out.
We're in the month of July.
We see this market liking what it's seeing because the reality is that this labor market is perhaps a little bit stagnant.
It's not growing as strongly as we may have expected just a month ago, and that allows the Fed.
To perhaps pause here to directly answer your question, I believe that is the path forward for the next 6 months.
I don't see the Fed raising interest rates.
A lot of this got started not only because of a hotter than expected labor market, but because of a spike in oil prices.
And Remy, as we start to see oil prices working down below $70 a barrel, I think eventually that bleeds into the gas pumps.
Eventually that bleeds into CPI.
And eventually you see inflation perhaps no longer be the determining factor as to whether or not the Fed needs to adjust interest rates.
This is a good thing for the market.
It's a good thing for the consumer.
If the opposite takes effect, I think it's a bad thing for both the markets and the consumer because you see.
Interest rates means higher costs for borrowing and clearly a sell-off in the market as a result.
So what we're seeing this morning is a result of a weaker than expected labor market.
It's not that the market, the stock market is not perhaps celebrating a weaker market.
It's just celebrating the fact that the Fed can push the pause button.
Yes, absolutely, Dale.
I'm glad you walked us through this because we are looking at that market reaction.
The major US stock averages higher and rallying on the heels of that jobs report, and this does come after a stellar Q2 for the equity markets in addition to the.
First half of this year, but bad news in terms of economic data couldn't be good news for the stock market.
So while I have you here, I do want to get your take on what we're seeing in the AI trade.
What do you make of the price action that we saw overnight and what does this mean heading into the second half?
Yes, Remy, the AI trade at this point does not concern me.
I think demand continues to be strong, earnings continue to be strong.
This pullback that we've seen is again on the backs of a potential Fed rate hike.
If that were to be the case, artificial intelligence, that tech sector is probably the most impacted because of the bottom line.
After you pay a higher interest debt service, your bottom line gets smaller.
But if interest rates stay still, oil works down, demand stays high for artificial intelligence, and our.
In our view, we're looking at 2028 perhaps before that demand starts to cool.
Supply is restrained, and we see that in memory names.
Clearly the supply of memory is nowhere close to what we need it to be for demand.
The supply and demand alone causes these stocks to continue to climb, not to mention earnings and productivity.
You know this cooling off that we've seen over the last couple of weeks is profit taking, a little bit of fear and uncertainty of what lies ahead in the coming short term 2 to 3 month period of time, 2 to 3 year period of time.
I think the market likes artificial intelligence and tech takes the overall market higher.
Well Dale, we will have to leave it there for today, but thank you so much for joining us and have a great holiday weekend.
Happy 4th of July to you, Remy.
Thank you.
