Interest rate cuts and jobs define Wall Street trends

Prepared by: Wael Badr Eddin

The Fed is expected to offer rate cuts on Wednesday for the first time in more than 10 years, but many observers see it as a precautionary measure in the face of growing concerns over the impact of the trade war and slowing growth. world economy. The job report announced Friday is expected to show the strength of the US economy. According to some sources, more than 170,000 non-farm jobs were added, with the unemployment rate rising to 3.7%, which is closely related to the report. The gross domestic product (GDP) of the quarter unveiled last week grew by more than 2.1%, while highlighting that the tariff and trade war had a significant impact on overall economic performance.
After a week in which US stocks have made significant gains, investors will make the decision to soften interest rates because of the current circumstances. The S & P 500 and Nasdaq have reached new records, in addition to the season of positive results The market is expected to progress further this week, with about one-third of the S & P 500 companies reporting their results. Apple, Exxon Mobil, P & G, Merck, GM and Verizon, announced their results this week, reports indicate that companies that will be announced during this period will exceed their expectations by more than 60%.
Despite expectations of corporate earnings, the Federal Reserve's decision to cut interest rates for the first time in a decade will likely have a major impact on market trends, especially as experts wait for advice. that it shows great flexibility to further reduce interest rates in the future. Economists have been able to cut interest rates up to three times this year and it was unanimously agreed that the expected reduction would be a quarter of a percentage point. Observers have suggested that future cuts would boost market performance despite senior officials' reservations.
On the other hand, recent studies have shown that the current debate over interest rate cuts is due to a number of reasons, the most important of which is the trade war between the United States and various parties such as China, which is characterized by a considerable economic weight in the world, as well as by some European countries. The European Union system is no less important than China, as is the slowdown in global growth caused by many factors.
The tariff war imposed by the United States on many international players has revealed that total private domestic investment in the second quarter fell by 5.5%, the sharpest decline in this sector since 2015, in addition to Losses were not limited to these figures, but were also reflected in the decline in commercial investment, which in turn had a direct impact on GDP figures, without which the figures would have been more positive.
The economic statistics of recent weeks show a clear improvement over the Federal Reserve meeting compared to the previous two quarters: the consumer sector, which is the largest component of the economy, has grown 70 % 4.3%, the best quarterly growth since the fourth quarter of 2017. This week, investors should also anticipate the evolution of trading, a period during which the US delegation will resume negotiations with China.