02 July 2020

Nasdaq Hits Another Record Close, US NFP in Focus

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News shaping
the markets today

     

What’s happening: The Nasdaq 100 spiked again to a new record close on the first trading day of the third quarter.

What happened: Promising data from Pfizer on its coronavirus vaccine and the Federal Reserve’s comments on the need for a “highly accommodative” monetary policy sent the Nasdaq to a fresh high amid heavy indices trading on the first day of the new quarter. The rally followed Nasdaq’s gain of around 31% in the previous quarter.

Markets eagerly await US employment data in the all-important nonfarm payrolls report, being released a day early with US markets closed on Friday for Independence Day celebrations.

Why it matters: Pfizer released positive results from its preliminary trial of a coronavirus vaccine candidate, showing that all participants developed neutralising antibodies. Ironically, while markets cheered this news, the Dow Jones index declined yesterday, despite Pfizer being a major component.

Market sentiment was further boosted by economic reports released yesterday, with the ISM manufacturing PMI surging to 52.6 in June, from a reading of 43.1 in May.

Automatic Data Processing also released strong data, indicating private-sector employers adding 2.37 million jobs in June. May’s numbers were also revised higher to 3.06 million job additions.

Tech stocks, including Netflix, Amazon and Tesla, delivered a modest rally, taking the tech-heavy index to a record high. Tech stocks have been supported by remote working trends amid the pandemic. The shares climbed as the US started reporting around 40,000 new covid-19 cases per day and the country’s top infectious disease expert, Dr. Anthony Fauci, warning of daily cases crossing 100,000 if people continued to shrug off public-health recommendations.

The Labor Department is scheduled to report the market-moving NFP report for June later today. Nonfarm payrolls are expected to rise by a record 3 million jobs in June, after rebounding by 2.5 million in May. The jobs data had declined by a record 20.687 million in April.

As companies begin rehiring furloughed workers, the unemployment rate is expected to ease to 12.3% in June, from 13.3% in May.

Although various US states have started scaling back reopening measures since late June due to a resurgence in coronavirus cases, the impact of these reversals will not affect the latest jobs data.

The Nasdaq Composite jumped 1% to close at a record 10,154.63 on Wednesday, while the S&P 500 rose 0.5% to end at 3,115.86. The Dow Jones index bucked the trend and declined around 78 points to settle at 25,734.97 yesteday.

What to watch: Apart from the NFP report, investors await the balance of trade, initial jobless claims, ISM New York current business conditions index and factory orders. The US trade deficit is expected to widen to $53 billion in May, from $49.4 billion in April. Initial jobless claims are expected to ease to 1.355 million in the latest week. Analysts expect factory orders to increase 8.7% in May, after a 13% decline in April.

Markets will continue to keep an eye on the daily coronavirus numbers, with the US reporting almost 2.7 million cases with more than 128,000 deaths.

The Markets Today

     

The Canadian dollar will be in focus today, ahead of economic data scheduled for release later in the day.

Context: The loonie continued to find support yesterday, while the greenback moved lower versus a basket of major currencies.

Details: The US released positive economic reports and Pfizer announced encouraging trial results for its covd-19 vaccine, which supported riskier assets yesterday. US manufacturing PMI climbed to 49.8 in June, while the ISM manufacturing PMI jumped to 52.6.

The Canadian dollar could have tended higher yesterday, if crude prices breached the $40 resistance level, with the loonie being a major commodity-related currency.

The USD/CAD pair rose initially to 1.3600 but failed to hold ground during the US session. The dollar fell to a session low of 1.3550 versus the loonie, settling the day at 1.3588.

The US Dollar index, which measures the greenback’s performance versus a basket of foreign currencies, dipped towards the 97.00 level on Wednesday.

 What to watch: Investors await Canada’s balance of trade and manufacturing PMI data. The country’s trade deficit, which widened to C$3.25 billion in April, is expected to shrink to C$3 billion in May. Canada’s imports and exports are expected to grow from the previous month’s levels.

Other Markets: European indices were trading higher at 8:30 am GMT, with the FTSE 100, French 40 and German Dax 30 index up by 0.77%, 1.51% and 1.91%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UAE’s loan growth as well as the US EIA’s natural gas stocks and Baker Hughes crude oil rigs.

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