The stock market is a funny critter, good news can make it go down. CNBC reports the Dow dropped 200 points when high June employment numbers reduced the likelihood of a Federal Reserve cut in the interest rate.
Why so? There is always money that people need to ‘park’ somewhere it will earn a return. If interest rates go up, more of that money will be invested in bonds, savings accounts, and CDs, meaning less will be used to purchase shares of stock. Less money chasing shares means share prices will be lower than otherwise would be the case, and the market drops.
More people working is good news for them, and the Fed agrees. It sees that extra purchasing power as buoying the economy, meaning additional Fed stimulus in the form of lower interest rates isn’t so necessary. Higher interest rates are seen as negative for the stock market, hence market sentiment becomes less rosy. Hat tip to Drudge Report for the link.
