There’s been a perverse notion this year that bad economic news is actually good news for stocks, because a warming economy will give the Federal Reserve the green light to cut interest rates. This makes some sense, as inflation emerges as a major market demon in a slowing economy for the first time in a while. But now, investors find themselves facing a slew of disappointing economic data a day after the Federal Reserve voted to keep short-term interest rates at their highest level in two decades. Yes, Fed Chairman Powell did give a clear hint on Wednesday that a modest 25 basis point interest rate cut would be coming in September, but the market woke up on Thursday worried that the rate cut might be too little, too late. Weak data of the day: U.S. manufacturing activity fell 1.7 percentage points to 46.8% in July from June, according to the Institute for Supply Management. Any number below 50% portends a contraction. The number of people filing for unemployment insurance for the first time last week was 249,000, 14,000 more than expected. This is the highest level since August 2023. Investors got their wish, with the 10-year Treasury yield falling below 4% for the first time since February. But instead of rising, the Dow Jones Industrial Average plummeted. .DJI 1D The Sandow Index, the biggest 1-day loser in the recession, led gains, with JPMorgan Chase & Co. and Caterpillar Inc. falling. Even technology stocks are finding themselves in the red as a slowing economy could hurt them more than falling interest rates on their valuations. “This morning, economic data continues to trend in a subdued, if not recessionary, direction,” said Chris Rupkey, chief economist at FWDBONDS. “The stock market doesn’t know whether to laugh or cry, because even though the Fed may cut interest rates three times this year, The 10-year bond yield will also fall below 4%, but manufacturing purchasing managers say the winds of recession are hitting companies hard.” Vital Knowledge’s Adam Crisafulli agreed: “The ISM gap is just the latest sign of cooling domestic growth conditions and another sign that the Fed should begin its easing cycle yesterday rather than wait until September.” Markets appear to be returning to natural order, and investors are first The hope is for a strong economy, which boosts profits, followed by lower interest rates, which boosts valuations. Friday comes just in time for the July jobs report, which expects job growth to slow to 185,000 from 206,000 last month, according to Dow Jones estimates. ——Reporting by Li Yun and Jeff Cox
