US Stocks Drop Ahead of Employment Data – Nasdaq down 0.6%
US stock markets traded lower overnight as investors adopted a cautious approach ahead of today’s highly anticipated US Non-Farm Payrolls report. Market sentiment was also influenced by comments from Federal Reserve Chair Kevin Warsh, who reaffirmed that the Federal Open Market Committee remains committed to maintaining its 2% inflation target, reinforcing expectations that policymakers will remain focused on price stability.
US equity markets closed modestly lower, led by weakness in the technology sector. The Nasdaq fell 0.66% to close at 26,040, while the S&P 500 declined 0.22% to finish at 7,483. The Dow Jones Industrial Average was little changed, easing just 0.03% to end the session at 52,305.
US Treasury yields edged higher across the curve as traders positioned ahead of the key employment data. The 2-year Treasury yield rose 0.2 basis points to 4.174%, while the benchmark 10-year yield gained 1.4 basis points to 4.479%. The move higher in yields helped support the US dollar, with the US Dollar Index advancing 0.23% to close at 101.40.
Energy markets moved lower following the conclusion of US-Iran talks in Qatar, with investors increasingly optimistic that shipping through the Strait of Hormuz will continue uninterrupted, easing concerns over potential supply disruptions. Brent crude fell 2.56% to settle at US$71.08 per barrel, while West Texas Intermediate crude declined 1.32% to US$68.58 per barrel.
Gold experienced another volatile trading session before finishing higher, with the precious metal gaining 0.57% to close at US$4,029.89 per ounce as investors continued to balance a firmer US dollar against lingering geopolitical uncertainty and ongoing demand for safe-haven assets.
Non-Farms Pivotal into the Weekend for FX Markets
Traders are expecting to see a very lively session on Thursday this week, with the key US employment data due out a day early because of the US Independence Day holiday on Friday. The market is expecting the headline Non-Farm Employment Change data to show an increase of 114k new jobs in the last month – down from last month’s surprise 172k print – and anything significantly different from this print will likely see big moves in the FX world, with several currencies sitting at pivotal levels. The dollar is sitting near annual highs against most of the majors, and at a multi-decade high against the yen. The risk of big moves firmly sits with another surprise higher result, especially after Fed Chair Kevin Warsh confirmed overnight that the 2% inflation target is still firmly in place for the FOMC. A stronger print would likely see the greenback break into fresh ranges against most of the majors and could see USD/JPY surge, which is unlikely to please Japanese authorities. A weaker result should see the dollar pull back into recent ranges and perhaps limit the Fed to just one hike in the coming months.
Focus on US Employment Data Today
Traders are preparing for a busy Thursday ahead as US data gets crammed into the schedule before the long Independence Day weekend. There is little on the cards in the Asian session again today, and there will be a brief focus on Swiss markets early in the London session when CPI (exp. +0.1% m/m) is released. However, the main event of the day, and the week, comes in the New York session. Key employment data is due out early in the day, with the release of the June Non-Farm Payrolls report (exp. 114K) expected to set the tone for global markets heading into the weekend. Markets will also be closely watching Average Hourly Earnings (exp. +0.3% m/m), the Unemployment Rate (exp. 4.3%), and Weekly Unemployment Claims (exp. 219k) for further insight into the strength of the US economy and the likely path of Federal Reserve interest rate policy.
