Nvidia’s Dip and Weak Jobs Report: Why This Bull Market Still Thrives

Wall Street often feels like a battleground. Recent events have highlighted that reality, especially with the latest jobs report falling short of expectations. The economy is showing signs of stress, with the three-month average payroll increase at levels typically seen before recessions.

Big players like Nvidia, a leader in tech stocks, have seen their shares drop by 8% in just over a week, even after announcing strong earnings. Bitcoin has also followed suit, with a 10% pullback since its August peak. Many highly anticipated IPOs, such as Figma and Circle, have dropped between 40% and 60% from their post-launch highs.

September is historically tough for stock returns, and this year is no different. Despite the challenges, the S&P 500 is still up 10% for the year, nearly reaching an all-time high. The recent decline in response to the jobs report shows how fragile the current market is. The disappointing job figures—only 22,000 jobs added in August—has fueled discussions about potential interest rate cuts from the Federal Reserve.

Bank of America economists recently revised their predictions, now expecting two rate cuts this year. They attributed this change to not just the poor jobs report but also Fed Chair Jerome Powell’s focus on employment risks. The overall labor market has been affected by a reduced number of foreign-born workers and an aging population, which has reduced the total labor pool.

Despite these challenges, there are glimmers of hope. Some experts point to an increase in the number of prime-age workers employed. This mixed outlook complicates the narrative: the Fed may cut rates without urgent economic need while the stock market remains strong, credit spreads are tight, and job layoffs remain low.

Historically, when the Fed has resumed rate cuts after a pause, the stock market has performed well. A recent study by Ned Davis Research revealed that financial conditions on Main Street are much tighter than those in public markets. If the Fed acts timely, reductions in Treasury yields and mortgage rates could support consumers.

The current market sentiment reflects cautious optimism. Stocks haven’t experienced extreme bullish behavior, but investor equity allocations are high, and many are eager to buy dips. However, expectations for future stock returns have to be tempered, given that the S&P 500 and Nasdaq 100 have faced resistance at their current price-to-earnings ratios.

In the grand scheme, while some analysts are hopeful, it’s crucial for the market to find a sustainable path forward. The balancing act of optimism and caution will be critical as we navigate evolving economic conditions.

For a deeper dive into these updates, you can check out resources from Bank of America and Ned Davis Research.

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