Increased Jobless Claims Could Fuel Rate Cuts & S&P 500

The markets these days have been especially sensitive to economic data, as any indication of weakness could mean rate cuts may finally be close. That, in effect, should also push the S&P 500 to even higher heights.

The capital markets rolled out the red carpet for rate cuts in last year’s rally, but the return of the higher-for-longer narrative got in the way of that red carpet walk. Conversely, a data-dependent Fed could see jobless claims rise, thus providing the impetus to finally consider loosening monetary policy.

“New claims for jobless benefits rose to 215,000 in the week ending Feb. 24, up from a revised 202,000 in the prior week,” reported Investor’s Business Daily. “The four-week average of weekly claims fell 3,000 to 215,500.”

The rise in jobless claims could just be the start. As IBD mentioned, economists could be expecting those initial numbers to keep climbing. If that’s indeed the case, the indication of slowing economic growth could be the catalyst that the Fed wants to see before cutting interest rates.

“Some economists are expecting a significant rise in jobless claims over coming months, which would surely ease the Fed’s concerns about cutting rates too soon,” the report confirmed.

“We suspect the labor market will start to look significantly weaker by around the middle of the spring,” wrote Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.