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08.07.2022: Wall Street affected by upbeat NFPs (S&P500, USD, CAD, Bitcoin)
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Hi, dear traders! With a fresh portion of market analysis, you will be well equipped for trading today. Wall Street investors are looking forward to the report of major importance, the US nonfarm payrolls. The stock market perked up in anticipation of the data.
Yesterday, the benchmark stock indices closed with gains. The Dow Jones added 1.1%. The Nasdaq jumped 2.3%, extending a 4-day winning streak. The S&P 500 was 1.5% to close at 3,902. The three major indices are trading lower in the New York pre-market. The intraday corridor for the S&P 500 is seen between 3,810 and 3,920.
Wall Street enjoyed the long-awaited growth despite hawkish remarks from Christopher Waller and James Bullard who advocated for another rate hike of 75 basis points this month. They also dispelled the illusion that the central bank would ease the pace of monetary tightening after the aggressive rate hikes.
In this context, stocks of companies with mega market capitalization gained ground. Intel and Nvidia stocks were the best performers amid the upbeat forecast for Samsung’s revenue. However, today high-tech giants reversed downward.
The reason is the US labor market that proved to remain on a sound footing. Healthy employment conditions are the cornerstone for the US Fed to decide on further tightening.
The US public and private sectors created 372,000 jobs in June, much stronger than the forecast of 268,000 jobs. The employment growth in June is slightly below the one in May with 384,000 jobs. Besides, US employment excluding the farm sector decreased by 524,000 jobs or 0.3% from the pre-pandemic level in February 2020. The private sector recovered almost in full after massive lay-offs during the pandemic.
When it comes to wages, US employers proceeded with pay rises. Average hourly earnings increased 0.3% in June following a 0.4% climb in May. As a result, wages slowed down to 5.1% from 5.3% in the previous month, whereas economists had projected a 5.0% growth.
The higher-than-expected employment growth in June ensures almost full employment in the US economy. The jobless rate remained flat at 3.6% for four months straight, which does not match the economic conditions of a country at the verge of recession. The US Fed wants to reduce demand for labor force with a view to curbing inflation to the target level of 2%. Hence, the strong employment data does not bode well for the stock market. Indeed, strong employment suggests another rate hike of 75 basis points.
Even Raphael Bostic, the Fed’s dove, supported another aggressive rate hike soon. Assessing the fresh nonfarm payrolls, he confirmed that the US economy remains healthy and the labor market maintains momentum.
Recent macroeconomic data proves that the US will hardly slip into a recession in the near future. At least, it might happen later than economists warn.
The US dollar index is flexing its muscles. After a brief pause on Thursday at about 107.1, the greenback is again advancing against its rival currencies. The index is expected to trade in the corridor between 106.9 and 107.6 today.
The triumph for the pound sterling is over. The euro and the sterling have reached rock bottom. The US dollar is benefitting from the doom and gloom in the currency market. In light of the upbeat nonfarm payrolls, the US Fed has enough levers to raise the funds rate by another 75 percentage points in July and perhaps later. Both the US dollar and the US economy are winning favor with investors.
As projected earlier, the USD/CAD pair went down yesterday on the back of a rebound in oil prices. The currency pair sank to 1.2967 and reversed upward today. The intraday corridor is defined between 1.2960 and 1.3040.
The USD/CAD pair has been gyrating this trading week. The loonie has been sensitive to the US dollar’s rally and turbulence in commodity prices. Today the oil market is calming down, trying to puzzle out what is worse: low demand and recession or oil shortage. US Treasury Secretary Janet Yellen is going for an official trip to Asia next week where she will seek support in setting a price cap on Russian oil imports.
Today benchmark oil grades are trading moderately lower. Brent crude is trading at 104.31 dollars a barrel. WTI is trading at about 101.90 dollars a barrel.
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