Stocks fell coming off the Labor Day weekend, dragged down by news that Russia was cutting off natural gas supplies to its European customers. Stocks were also under pressure due to a surprisingly strong report on business conditions, which heightened fears of continued Fed hawkishness.
Sentiment quickly improved as bond yields turned lower and oil prices fell. Investors reacted positively to comments by Fed Vice Chair Lael Brainard, who reiterated the Fed's commitment to quashing inflation while acknowledging the risks of going too far. Stocks added to their gains on Thursday as the market digested another speech from Fed Chair Powell and a 0.75% hike by the European Central bank. The markets surged on Friday amid little news, ending a positive week on a upbeat note.
In an interview on Thursday, Powell reaffirmed the need for sustained and robust actions to bring down inflation. He emphasized that it was critical that "the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to really raise the costs of getting inflation down."
With the Federal Open Market Committee (FOMC) set to meet on September 20-21, these comments may indicate that market expectations of a rate hike of 0.75% this month align with the Fed's plans.
All of this comes before yesterday's August inflation reading. The Bureau of Labor Statistics released its consumer price Index (CPI) for August early Tuesday, which showed prices rose 8.3% over the prior year and 0.1% over the prior month. Economists had expected an 8.1% increase in inflation over last year and a decline of 0.1% over the prior month. This caused all major indexes to have their worst day since June of 2020. The S&P 500 sank 4.3%, while the Dow Jones Industrial Average erased more than 1,275 points, or roughly 4% just yesterday alone.
Employers added 315,000 jobs in August, maintaining the labor market's remarkable resiliency amid a contracting economy. The unemployment rate rose to 3.7%, up from last month's 3.5%. The gain followed an uptick in the labor participation rate, which expanded from 62.1% to 62.4%. Wages continued to grow, rising 0.3% in August and 5.2% from 12 months ago.
Sectors seeing the most significant increase in new jobs were professional and business services, healthcare, and retail. Lagging sectors were manufacturing, financial, and wholesale trade.
Student Loan Forgiveness
The White House recently forgave up to $10,000 to student loan borrowers as part of a large debt forgiveness program. There are still quite a few questions to be answered, but here are some key points to know.
Pell Vs. non-Pell: Loan forgiveness of up to $10,000 is available to non-Pell Grant recipients and up to $20,000 for Pell Grant recipients. Only Federal student loans are able to be forgiven. Loans held through a private lender are ineligible for this program.
No Surplus: The amount of student loan forgiveness available depends on how much you still owe. If you only owe $8,000 in federal loans but qualify for $20,000 of relief, you will not be receiving the surplus of $12,000.
Income Cap: Borrowers with salaries under $125,000 (for individuals) or under $250,000 (for married couples or heads of households) are eligible for relief.
Loan Dates: Federal loans taken out after June 30, 2022, do not qualify for loan forgiveness.
Application Process: Depending on your lender, you may already be approved and have your account credited by the end of the year. However, an application is expected to be released in coming weeks before the student loan payment pause ends on December 31,2022.
Be Aware: As more details are released, scams may also pop up. Remember to practice caution and good business sense if someone contacts you about your student loans.
As always, I'm happy to help with any questions you may have.
This Week: Key Economic Data
Tuesday: Consumer Price Index (CPI).
Wednesday: Producer Price Index (PPI)
Thursday: Retail Sales. Industrial Production. Jobless Claims.
Friday: Consumer Sentiment.
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