US Stocks Drift After Stronger Payroll Numbers – Nasdaq off 0.16%
US equity markets closed modestly lower overnight following the release of US employment data that exceeded expectations. The Dow Jones Industrial Average declined 0.13% to 50,121, while the Nasdaq Composite fell 0.16% to 23,066. The S&P 500 finished the session at 6,941, broadly steady on the day. In foreign exchange markets, the initial reaction to the data was strong; however, ultimately the dollar closed only marginally higher, with the US Dollar Index edging just 0.02% higher to 96.91. Fixed income markets, however, registered a more pronounced adjustment. US Treasury yields moved higher as investors pushed back expectations for the timing of the Federal Reserve’s first rate cut. The 2-year yield rose 5.8 basis points to 3.51%, while the benchmark 10-year yield increased 3.0 basis points to 4.172%, reflecting a reassessment of the near-term policy outlook – July now priced in for the first move. Commodity markets extended their recent gains. Brent advanced 1.29% to settle at $69.69 per barrel, while WTI rose 1.53% to $64.94, supported by ongoing tensions in the Middle East. Gold also continued its recovery, climbing 1.17% to $5,084.39 per ounce as investors maintained exposure to the precious metal despite firmer yields.
US Data Remains in Focus for Markets
It has been a relatively heavy US data week so far, and we have seen a couple of conflicting results, with Retail Sales numbers coming in well under expectations while last night’s employment data beat estimates on all three releases. The Non-Farms result really pushed back on market pricing for the dollar, which has been on the back foot in the last few sessions; however, by the end of the session, the DXY was close to flat. Fed rate cut expectations have moved, with the market now looking for the first 25-basis-point cut of the year in July, not June – déjà vu from 2025 – and Treasury yields have moved accordingly. Traders are now looking at Friday’s key CPI data, which will give the market a good view on the second half of the Fed’s dual mandate, and if inflation surprises on the topside or just remains sticky, we may see some of the dollar bearishness come out of the market and majors pull back into recent ranges.
Quieter Calendar Day Ahead for Traders
The macroeconomic calendar is relatively light in the upcoming sessions; however, volatility may persist as markets continue to digest recent economic releases and geopolitical developments. There is little on the schedule to move markets in the Asian session; however, traders are expecting moves in the yen with the return of Japanese markets after a holiday yesterday. The London session will see a strong focus on UK markets, with a big data drop due early in the session; the highlights are likely to be the GDP (exp +0.1% m/m) and Prelim GDP (exp +0.2% q/q) numbers, and traders are expecting moves in sterling around the event. The New York session has just the Weekly Unemployment Claims (exp 222k) on the data calendar today, but investors are expecting the fallout from last night’s employment data to continue to resonate through the session.
