Stocks Rally to Record Levels After More Weak Data – Nasdaq up 1%
The three major US stock indices all rallied in trading yesterday after more jobs numbers came in weaker than expected. The ADP Non-Farms number printed lower than expected and unemployment claims rose, pointing to a weakening jobs sector ahead of today’s key Non-Farms update. The Dow rose 0.77% to 45,621, the S&P hit a record close, up 0.83% to 6,502, and the Nasdaq added 0.98% to 21,707. Treasury yields dropped to 4-month lows after the data, the 2-year down 2.9 basis points to 3.587% and the 10-year down 5.6 basis points to 4.161%. However, the dollar managed to make slight gains against the majors, the DXY up 0.13% to 98.27. Oil prices dropped again after US inventories jumped, Brent down 1.18% to $66.80 and WTI down 1.05% to $63.30 a barrel. Gold took a breather after historic rises over the last few days, closing down 0.38% at $3,545.82 an ounce.
Potential for a Hit on Non-Farms
It will be all about the Non-Farm Payroll data for traders today, with FX players in particular expecting to see some big moves after the data is released. We have already had three other job numbers out of the US this week, and all three—the JOLTS Job Openings, the ADP Non-Farms, and the Weekly Unemployment Claims—have pointed to a weakening jobs market and therefore more and quicker interest rate cuts from the Fed. If we see a much weaker-than-expected print from the NFP tonight, then several major FX pairs are poised for big moves. Euro, Cable, and the Aussie are sitting near strong long-term support lines, and USDJPY and USDCHF are near resistance trendlines. A weaker print should see those currencies appreciate against the greenback, with traders being able to utilize those levels. A much stronger-than-expected number would be a real shock and could lead to big break trades of those levels and even bigger moves. Whatever the case, it’s likely to be a busy final session of the week.
Non-Farm Payroll Day for Traders
It is Non-Farm Payroll Day today, and traders are expecting to see classic trading conditions in the sessions ahead, with markets likely to remain rangebound ahead of the key employment data out of the US. There is little of note on the calendar in the Asian session, but markets are expected to start on the front foot after a strong day on Wall Street. The London session does see the release of UK Retail Sales numbers (exp +0.3% m/m), but the major focus will be on the US numbers once New York opens. The headline Non-Farm Payroll number is expected to show a 75k rise in jobs in August, with the Average Hourly Earnings remaining steady at +0.3% and the Unemployment Rate creeping up to 4.3%. Any significant deviations from that will see big moves in the market. The Canadian employment numbers are out at the same time—Employment Change (exp +4.9k) and Unemployment Rate (exp 7.0%)—which could give Loonie traders a bit of a headache, but expect the US data to dominate sentiment.
