Economy emerges as key market flashpoint

October 06 00:26 2015

The weaker-than-expected September jobs count pretty much rules out, or lowers the odds greatly for an interest-rate hike later this year from the Federal Reserve. What it does, though, is refocus Wall Street’s attention on the U.S. economy. September was the second month in a row in which the number of monthly jobs created fell shy of Wall Street expectations. The 142,000 jobs count was far below economists’ 200,000 forecast. And revising down August job gains by 37,000 adds to the angst. The new worry: deceleration in the U.S. economy.

While Fed chair Janet Yellen continues to insist the Fed still sees a window to hike rates this year, Wall Street effectively slammed that window shut after Friday’s job report. Reactions to the weak jobs report from money managers and economists ranged from there’s a “zero chance of a hike” to “the chances of a rate hike went way down” to “no rate hike until early 2016.”

If that’s the case, Wall Street will turn its attention to the economy, which is showing signs that it is not immune to foreign woes in places such as China. Wall Street, like it or not, is on recession watch. After the U.S. economy grew 3.9% in the second quarter, mentioning the “R” word seems misguided. But not so much when you consider Barclays slashed its GDP growth for the third quarter to just 1.2%, citing a weaker-than-expected 1.7% drop in August factory orders announced Friday.

The next economic data point will be a fresh reading Monday on the health of the services sector of the economy, which accounts for the bulk of U.S. economic activity. Another plot line involves the Fed, which Thursday releases minutes of its closely watched September meeting, when they opted not to hike interest rates.