US stocks drop for a second day after a strong jobs report dents the odds of a Fed rate cut

AP Photo/Richard Drew
  • Stocks fell on Monday after a stronger-than-expected employment report called into question the need to kickstart the economy.
  • The June jobs report tempered expectations for the Federal Reserve to aggressively lower interest rates this month.
  • Congressional testimony by Fed Chair Jerome Powell on Wednesday and Thursday could offer further clues on where monetary policy is headed.
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Stocks fell on Monday after a rebound in employment called into question the need to kickstart the economy, softening expectations for the Federal Reserve to aggressively lower interest rates this month.

The three major US indices fell from record highs for a second day as traders continued to digest the jobs report out Friday, which showed the economy added 224,000 jobs in June after an anemic reading the month before.

The surprisingly robust report tempered expectations for the central bank to slash its benchmark interest rate by a half a percentage point at a two-day policy meeting that begins July 30. The probability of a 25-basis-point cut is still about 94%, according to CME Group.

Here’s a look at the closing numbers:

Apple shares shed 2% after Rosenblatt Securities downgraded the technology giant to a “sell” rating. That came as it predicted the company would grapple with “fundamental deterioration” over the next year.

On the data front, the Fed Bank of New York said the inflation outlook rose for the first time in three months in June. Congressional testimony by Chair Jerome Powell on Capitol Hill on Wednesday and Thursday could offer further clues on where monetary policy is headed.

“We think markets have gone too far in pricing lower rates, and prefer stocks and cash over shorter-maturity US government bonds,” said Mark Haefele, the global chief investment officer at UBS.

The yield on the benchmark 10-year Treasury note fell slightly to 2.041% on Monday, and the yield on the 2-year edged higher to 1.886%.

Within the S&P 500, these were the largest decliners:

And the largest gainers:

Oil prices steadied despite Iran saying it would breach the 2015 nuclear deal, a move that sparked tensions with the US and across Europe. The international benchmark Brent slid to below $US64 per barrel and West Texas Intermediate fell to $US57.46.


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