Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed deep in the red over renewed labor market and AI valuation concerns. The Volatility Index (VIX), which measures expected stock market volatility over the next 30 days based on options prices, closed with an 8.72% gain and is now up by 20.64% during the past week.
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U.S. employers cut 153,074 jobs in October, a 175% year-over-year increase and the highest total for the month since 2003, according to outplacement firm Challenger, Gray & Christmas. Companies like Amazon (AMZN), Target (TGT), and United Parcel Service (UPS) announced layoffs during the month as warehousing and technology sectors were hit especially hard.
“Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” said Challenger, Gray & Christmas chief revenue officer Andy Challenger. Hiring is also facing trouble, with year-to-date planned hires at 488,077, the lowest since 2011.
Maximizing the employment rate is one aspect of the Fed’s dual mandate, while the other is keeping inflation at bay. Lower interest rates could help boost the labor market, although it could also result in higher inflation. That’s at the top of mind for Cleveland Fed President Beth Hammack, who believes the Fed should proceed cautiously with rate cuts to avoid the risk of higher prices.
“After last week’s meeting, I see monetary policy as barely restrictive, if at all, and it’s not obvious to me that monetary policy should do more at this time,” said Hammack in prepared remarks for an Economic Club of New York event. Hammack added that she expects inflation to return to 3% and a higher unemployment rate during the next few months.
Finally, uncertainty over the fate of President Trump’s tariffs has gripped the markets, with the Supreme Court casting doubt on the legality of sweeping duties during Wednesday’s oral arguments. While it isn’t clear when the court will rule on the case, Treasury Secretary Scott Bessent is “very optimistic” that Trump will be able to continue imposing tariffs under the International Emergency Economic Powers Act (IEEPA). The Trump administration has collected $88 billion in tariffs, which is at risk of being refunded if SCOTUS decides to overturn Trump’s authority to impose them.
The S&P 500 (SPX) closed with a 1.12% loss, while the Nasdaq 100 (NDX) fell by 1.91%.
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