️Employment statistics worsen, yet AI stocks remain strong. The 'Interest Rates, CPI, and FOMC' that will determine the October market

🇺🇸Employment statistics worsen, yet AI stocks remain strong. The ‘Interest Rates, CPI, and FOMC’ that will determine the October market

U.S. stocks rose following the employment statistics. Non-farm payrolls in September increased by 29,000, significantly lower than the market expectation of 90,000. The unemployment rate was 4.2%, and average hourly earnings rose 0.1% month-on-month and 3.0% year-on-year. Furthermore, employment figures for July and August were revised downward by a total of 60,000. The labor market is clearly losing momentum.

At first glance, this is bad news. However, the stock market’s reaction was the opposite. The structure is: weak employment leads to receding expectations for additional rate hikes, which weakens upward pressure on interest rates, providing a tailwind for NASDAQ, AI, and growth stocks.

From here on, the three key factors for viewing the U.S. stock market in October are ’employment,’ ‘interest rates,’ and ‘AI.’

■ Employment is weakening

What is important about this employment report is not just the single-month figure of 29,000. July and August were also revised downward, with employment growth for the past two months reduced by a total of 60,000. In other words, the U.S. labor market may be weaker than anticipated.

On the other hand, the unemployment rate is 4.2%, which is not a sharp deterioration. The current situation is closer to low hiring and low layoffs rather than an ’employment collapse.’

This creates a difficult situation for the Fed. If employment weakens, it becomes hard to continue monetary tightening. However, if inflation remains high, they cannot easily ease monetary policy. This is where interest rates become the next important factor.

■ Interest rates will be the real enemy of AI stocks