US Stocks Pull Back Ahead of Big Day – Dow drops 0.7%
US equity markets pulled back in trading overnight as investors absorbed the latest Fed comments, a fresh round of economic data, and after-hours earnings from several tech heavyweights. The Dow led the losses, falling 0.74% to 44,130, while the S&P dipped 0.37% to 6,339, and the Nasdaq held up better, easing just 0.03% to 21,122. The dollar extended its recent run higher with the USD Index gaining 0.24% to 100.06, while Treasury yields edged up again, the 2-year climbing 1.7 basis points to 3.957%, and the 10-year adding 0.4 bps to 4.374%. Oil prices pulled back from recent highs, with Brent down 0.86% to $71.85 and WTI off 1.06% at $69.26, as traders waited for clarity on today’s tariff deadline. Gold edged higher, up 0.45% to $3,289.07, as safe-haven bids crept in on the same trade uncertainty.
Employment Data Key for the Dollar Tonight
It has been a week dominated by updates from the US in financial markets, and the final day is shaping up to be no exception. The dollar has rallied strongly over the last few days, with the DXY up over 2.5% since Monday, and data that indicates a resilient jobs market today could see the greenback push even further north into the weekend. If we see a print in the headline figure of +/-30k, then traders are expecting to see big moves in the major currency pairs. A stronger result will surely push Fed interest rate cut expectations out from the September meeting and change the recent sentiment for the greenback, as it comes in line with much more clarity on US tariffs. The next target level for the DXY is the 29 May high at 100.54, and a break there will open the way for a move back to the May high at 101.98. Conversely, a much weaker print – and a jump in the unemployment rate – would see the dollar give up recent gains and increase chances of a 25-basis point cut at the next Fed meeting.
Non-Farms and Tariffs in Focus for Traders Today
All eyes now turn to the US employment data due out tonight, along with any developments on the tariff front. With those big releases hitting later in the session, markets are likely to remain in a holding pattern through the early part of the day before volatility kicks in later on. There is little on the agenda in the Asian session to see market moves. We could see some volatility in the euro early in the London session when EU CPI Flash Estimate (exp +1.9% y/y) and Core CPI Flash Estimate (exp +2.3% y/y) are released, but traders are expecting the big moves to come after the New York open. The headline blue-riband Non-Farm number is expected to show an increase of 106k jobs last month, with the Average Hourly Earnings at +0.3% and the Unemployment Rate creeping up to 4.2%. The ISM Manufacturing data is due out a couple of hours later, with expectations for a 49.5 print, but overall the employment update is expected to dominate sentiment into the weekend, as long as there is nothing hugely significant on the tariff front.
