US Stocks Hit on Weaker Sales Data – Nasdaq off 0.6%
US equity markets delivered a mixed performance overnight, with technology stocks coming under pressure following weaker-than-expected Retail Sales data. The Nasdaq declined 0.59% to 23,102, while the S&P 500 fell 0.33% to 6,941. In contrast, the Dow Jones Industrial Average demonstrated relative strength, edging 0.10% higher to close at 50,188. Fixed income markets responded positively to the softer economic data. US Treasury yields moved lower across the curve, with the 2-year yield declining 3.3 basis points to 3.452% and the 10-year yield falling 5.9 basis points. The US Dollar Index was broadly unchanged on the session, easing 0.02% to 96.85. Commodity markets traded in comparatively narrow ranges as geopolitical tensions showed signs of stabilising and participants positioned ahead of key US labour market data. Brent crude eased 0.04% to $69.01, while WTI crude declined 0.62% to $63.96. Precious metals were also softer, with gold falling 0.64% to $5,025.45.
Fed Rates in Focus Ahead of Key Data
We are set to get a full update on the US economy this week, and this could have a big effect on Fed rate cut expectations for the rest of the year. Last night, we saw Retail Sales data come in well under expectations, and yields were pushed significantly lower across the curve, with the 2-year yield down 3.3 basis points and the 10-year yield down 5.9 basis points. The dollar didn’t take too much of a hit, but expect that to change tonight with the Non-Farm Payrolls data set update and perhaps later in the week when we have the latest CPI data release. Anything significantly under expectations, or an increase in the unemployment rate, should see a reaction in the pricing for the next Fed rate cut – currently, the June meeting is priced in for the next 25 basis points – and, consequently, the dollar. The greenback is sitting at some relatively sensitive levels on some of the majors, and another kick from jobs data tonight could see it fall further.
Data Moves into Focus for Traders
Market participants now turn their attention to today’s scheduled releases, including inflation data from China during the Asian session and the US Non-Farm Payrolls report, Unemployment Rate, and Average Hourly Earnings data during the US session. The Asian session may see reduced liquidity due to a Japanese market holiday; however, attention will move to Chinese markets midway through the day, with both CPI (exp +0.4% y/y) and PPI (exp -1.5% y/y) numbers due out. There is little of note in the European session on the calendar, but we have the main event of the week due once New York opens. The delayed Non-Farm Employment Change (exp 66k), Unemployment Rate (exp 4.4%), and Average Hourly Earnings (exp +0.3% m/m) numbers are due out. These releases are likely to provide clearer direction across financial products in the longer term, while geopolitical developments remain an ongoing risk factor for broader market sentiment.
