08 June 2020

Strong Jobs Report Sends Nasdaq 100 to Record High

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News shaping
the markets today

     

What’s happening: The Nasdaq 100 surged to a new record intraday high on Friday following the US Labor Department’s strong jobs report for May.

What happened: US stocks climbed during Friday’s session after the jobs data surprised markets with the strongest monthly gains in jobs on record and a decline in the unemployment rate.

May’s jobs data came as a promising sign that the US economy had started to stabilise after the damage caused by the coronavirus-related business shutdowns. The Nasdaq 100 was the first major index to respond and spiked to a new record high, erasing all its losses resulting from the Covid-19-induced sell-off on rising hopes of the economy rebounding smoothly.

The strong jobs report fuelled some concern, however, regarding the Federal Reserve deciding to reduce its support as the economy recovers.

Why it matters: Wall Street had crashed into bear territory in March, when the coronavirus outbreak began in the US. With the economy now starting to reopen after months of lockdown, investors are hopeful of a steady revival in business activity.

These hopes were further fanned by the US Labor Department’s report showing that the US economy added 2.5 million jobs in May, versus forecasts of 8.3 million job losses. The unemployment rate also tumbled to 13.3% in the month, significantly better than the expectations of a rise to 19.5%.

The jobs data followed the initial jobless claims report, which showed that around 1.9 million people had filed for unemployment benefits for the first time in the latest week. This marked the ninth consecutive week in which the pace of new claims had slowed.

Friday’s jobs report boosted index trading, with speculations of the pandemic’s impact on the economy coming to an end sooner than anticipated.

The Nasdaq 100 jumped 2.1% to settle at 9,814.08 on Friday, after spiking to a record intraday high of 9,842.49. The index ended the session only 3.1 points short of its highest close on record.

The S&P 500 gained 2.6% to 3,193.93, while the Dow Jones index climbed 3.2% to 27,110.98 on Friday.

While Nasdaq 100 erased all losses due to the coronavirus-led sell-off, the S&P 500 is down merely 1% year to date and just 6% shy of its all-time high. The Dow Jones is 8% lower than its record high.

The US dollar also gained some momentum following its latest run of losses. The greenback recovered some losses versus the euro on Friday to finish at 1.1291 in New York, after falling below 1.1300 in the Asian session.

What to watch: The stock index futures are trading higher this morning, signalling a positive open on Wall Street. With no major data scheduled for release today, the Federal Reserve's monetary policy meeting will remain in focus. Investors will also keep an eye on weekly data for jobless claims, consumer sentiment and consumer prices during the week.

Investors will also continue to focus on the coronavirus numbers, with total cases climbing past 7 million globally. The US has so far confirmed around 1,940,460 cases with around 110,500 deaths.

The Markets Today

     

The Canadian dollar will be in focus today, after the currency surged to around a three-month high versus the greenback.

Context: The loonie rose against the US dollar on Friday after Canada reported strong jobs data, which lifted investor sentiment regarding economic recovery. The Canadian dollar gained more than 2% in the week against the greenback.

Details: Canada’s economy added 290,000 jobs last month, spreading cheer in the markets, which expected the jobs report to show a 500,000 decline.

Although the country’s unemployment rate increased to 13.7% in May from 13% in April, this was below the consensus estimate of 15%. Canada’s Ivey PMI also increased to 39.1 in May, from a record low of 22.8 in April.

Canada’s biggest trading partner, the United States, also disclosed unexpected gains in payrolls for May.

Gains in the currency market were also driven by a strong rise in the prices of oil, which is Canada’s major export product. WTI crude oil futures jumped 5.7% to $39.55 per barrel on the NYMEX on Friday.

The loonie gained 0.5% to 1.3431 versus the US dollar. The USD/CAD pair was trading down 0.01% at 1.3423 in the Asian forex session.

Canadian government bond yields also climbed, with the 10-year yields rising 5.7 basis points to 0.736%.

What to watch: Traders await Canada’s housing starts report today. Housing starts in the country declined 14.8% to an annualised rate of 166,415 in April. Investors will also look out for announcements from the Bank of Canada, amid speculations of the central bank scaling back some of its support following the strong jobs data. Covid-19 will also remain in focus, as the country confirmed over 97,170 cases and 7,870 deaths.

Other Markets: European indices closed higher on Friday, with the FTSE 100, French 40 and Dax 30 index up by 2.25%, 3.71% and 3.36%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s industrial production, South Africa's SACCI business confidence index, Russia’s total vehicle sales as well as the US consumer inflation expectations.

 

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