June Jobless Claims Surge, Bullish Sentiment Soars as Labor Market Softens Ahead of FOMC

June Jobless Claims Surge, Bullish Sentiment Soars as Labor Market Softens Ahead of FOMC

by

June jobless claims

In a surprising turn of events, initial jobless claims in the United States experienced a significant increase, reaching the highest weekly rate since October 2021. The rise in claims, accompanied by an upward trend in the four-week moving average, has caught the attention of investors as they eagerly await the upcoming Federal Reserve meeting. 

Market participants speculate that there’s a 66.7% chance the central bank will refrain from implementing a rate hike next week. Meanwhile, inflation, although showing signs of decline, remains stubbornly above the Fed’s target.

June 8th Jobless Claims Report, Specific Data

For the week ending June 3, initial jobless claims rose by a substantial 28,000, reaching a level of 261,000. This surge marks a notable departure from the recent trend of declining claims and warmer inflation data. Additionally, the four-week moving average of claims also saw an increase, rising by 7,500 to 237,250. These figures suggest a broader softening in employment conditions. 

The recent mix of hot and cold inflation data could represent a perfect goldilocks zone for the stock market. If inflation were too hot, the Fed’s hand would be pushed, and another rate hike would likely be assured. But if inflation were too cold, it would be a sign of a deteriorating economy, and potentially a recessionary signal.

Fed Meeting and Rate Hike Expectations

The timing of this surge in jobless claims is particularly noteworthy, as it occurs less than a week before the next Federal Reserve meeting. Investors have been eagerly anticipating the meeting, with hopes of gaining insight into the central bank’s plans regarding interest rates. Market sentiment is leaning towards the expectation that the Fed will choose to forego a rate hike this time around, given the recent softening in the labor market. The surge in jobless claims only adds to the argument that the Fed may opt for a more cautious approach in order to support the economy’s recovery.

Stock Market Reaction and Option Trading

In the face of these developments, Market Rebellion has noticed that options traders are largely adopting a bullish stance ahead of the upcoming Federal Open Market Committee (FOMC) meeting and the release of the June 13th CPI report. This optimistic positioning could indicate that market participants expect the Fed to adopt a dovish approach, keeping interest rates steady, without providing any surprises to the stock market. 

Additionally, the AAII investor report shows a swift uptick in bullish market sentiment this week, from 29.1% bullish on 5/31 to 44.5% bullish on 6/07.

AAII sentiment, market sentiment, bullish, June market sentiment data, June jobless claims, jobless claims, June FOMC

As a result, stocks are rallying in the wake of yesterday’s tech sell-off, which was the worst since April. 

  • The DIA Dow Jones ETF is higher by +0.43%
  • The SPY S&P 500 ETF is higher by +0.48%
  • The QQQ Nasdaq ETF is higher by +1.09%
  • The IWM Russell 2000 ETF, which outperformed yesterday, is lower by -0.55%

The Wrap Up

The recent surge in jobless claims, reaching its highest level since October 2021, has brought attention to the state of the labor market as investors eagerly anticipate the upcoming Federal Reserve meeting. With signs of softening employment conditions and inflation remaining stubbornly above target, the central bank faces a complex balancing act in its quest to foster economic growth while maintaining price stability. As options traders begin to switch to a bullish stance, it’s clear what outcome the market is expecting — but we’ll have to wait until the end of next week to find out if they’re right.

Try a month of UOA Essential today to find out what options activity we’re seeing under the surface of the market

Monthly
Annually

UOA Essential

Monthly Membership

$

199

/month

Cancel Anytime

See Terms of Use for details.

UOA Pro

Annual Membership

$

3,495

/year

Billed Annually at $3,495

Full 30-day money back guarantee on annual subscriptions. See Terms of Use for details.

UOA Essential

Monthly Membership
Call for Pricing
(888) 809-8058

See Terms of Use for details.

UOA Pro

Annual Membership
Call for Pricing
(888) 809-8058

Full 30-day money back guarantee on annual subscriptions. See Terms of Use for details.

UOA Essential

Annual Membership

$

995

/year

Billed Annually at $995

Full 30-day money back guarantee on annual subscriptions. See Terms of Use for details.

UOA Pro

Annual Membership

$

3,495

/year

Billed Annually at $3,495

Full 30-day money back guarantee on annual subscriptions. See Terms of Use for details.

UOA Essential

Annual Membership
Call for Pricing
(888) 809-8058

Full 30-day money back guarantee on annual subscriptions. See Terms of Use for details.

UOA Pro

Annual Membership
Call for Pricing
(888) 809-8058

Full 30-day money back guarantee on annual subscriptions. See Terms of Use for details.

Subscribe to Rebel Roundup for your weekly digest of market highlights and free trading lessons.
We’re on a mission to empower retail traders with the tools they need to succeed.

Join a growing community of traders with Market Rebellion

Join the thousands of users daily!
Start Your Day the Smart Money Way

Real-time Analysis

Interactive Chat Q&A
Professional Tactics