Jobless claims hit their highest level since 2021 last week, adding to recent labor market revisions that have fueled confidence the Fed will cut rates in September. Despite hotter CPI data, markets rallied on expectations of easing, with J.P. Morgan\u2019s Elyse Ausenbaugh and UBS\u2019s Mark Haefele urging investors to prepare portfolios for a rate-cutting cycle.<\/p>\n
If markets needed further evidence for a September rate cut<\/a>, they got it: Initial jobless claims for the first week of September came back as the highest in nearly four years.<\/p>\n The Labor Department revealed Thursday that initial claims rose by 27,000 to 263,000 in the week ended Sept. 6\u2014their highest level since October 2021.<\/p>\n Many saw the data (compounded by significant revisions to recent jobs reporting from the Bureau of Labor Statistics, which painted a far weaker employment picture than previously believed) as further pressure on the Federal Open Market Committee (FOMC) to cut the base rate.<\/p>\n That\u2019s because part of the Fed\u2019s mandate is to ensure stable and maximum employment, an aspect of its work that in recent months has been overshadowed by the fear of inflation\u2014mainly owing to President Trump\u2019s tariff plans.<\/p>\n On this account, Fed Chair Jerome Powell has agreed with many analysts that he will have to \u201csee through\u201d tariff increases as a one-off blip to price stability as opposed to an ongoing trend which will need to be managed.<\/p>\n This meant yesterday\u2019s consumer price index<\/a> (CPI) didn\u2019t come with the same level of gravity as it may have done otherwise. The BLS reported CPI for urban consumers increased 0.4% on a seasonally adjusted basis, up 0.2% from July.<\/p>\n The largest contributor to the increase was shelter, which rose 0.4%, while the food index increased 0.5%, with groceries increasing 0.6% for the month.<\/p>\n But markets shook off the warmer data: The S&P 500 is up 0.85% at the time of writing, the Dow<\/a> Jones is up 1.36%, and the Russell 2000 is up 1.83%. Despite political volatility in France, Paris\u2019s CAC was only down a marginal 0.45%, while London\u2019s FTSE 100 is up around 0.35%.<\/p>\n In Asia Japan\u2019s Nikkei 225 was up approximately 0.9%, while India\u2019s Nifty 50 increased by 0.46%.<\/p>\n Markets are \u201cbuoyant,\u201d wrote Deutsche Bank\u2019s Jim Reid to clients this morning: \u201cThe combined data prompted a rally in U.S. Treasuries, with 10yr yields falling \u20136bps lower after the print before closing \u20132.5bp on the day to 4.02% \u2026 However, the front-end rally ran out of steam as the day went on and 2yr yields closed a mere \u20130.1bps lower as markets remained hesitant to price in much risk of a 50bps cut, with September Fed pricing unchanged at 27bps.\u201d<\/p>\n Story Continues <\/p>\n