July Data Softens Rate Hike Odds as Market Eyes Jackson Hole

The July jobs report showed nonfarm payrolls fell by 23k, missing expectations of an increase of 83k. The unemployment rate dropped to 4.1%, but this was largely due to a decrease in the labor force rather than increased hiring.

The Consumer Price Index (CPI) also came in as expected, with a headline increase of 0.1% month-over-month and 3.4% year-over-year, while core inflation rose by 0.2% month-over-month and 2.5% year-over-year. These numbers led to a decrease in the probability of a September interest rate hike from around 50% to around 40%, according to Morgan Stanley.

The market's focus has shifted away from potential rate hikes and towards the Jackson Hole Symposium, which will take place from August 27-29. The event is expected to provide insight into whether the Federal Reserve still plans to raise interest rates or if they will adopt a more patient approach.