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S&P 500 declines despite upbeat NFP data

 

Monday, December 05, 2022

The news shaping the markets today

Nataliya Gumenyuk, the spokesperson for Ukraine’s Southern Defence Forces, said Russia is preparing for a “massive attack” on the country’s critical infrastructure. The news sent WTI crude prices higher this morning.


China’s Caixin general services PMI fell to 46.7 in November, from 48.4 in the previous month. Despite this being the steepest contraction in the country’s service sector since May, the CNY/USD forex pair rose on expectations of easing covid-relates restrictions.


Japan’s services PMI rose to 50.3 in November, versus a preliminary reading of 50.0, which sent the JPY/USD pair higher in forex trading this morning.


Hong Kong’s S&P Global PMI declined to 48.7 in November, from 49.3 a month ago. Despite this being the lowest reading since March, the HKD/USD pair rose in forex trading this morning.


Australia’s corporate profits surprisingly fell by 12.4% in the third quarter, missing market estimates of a 0.3% rise. However, the AUD/USD forex pair remained elevated after the news.

 

What’s happening: US stocks closed mixed on Friday, following the release of jobs data for November.

What happened: The US stock indices had recorded gains following Federal Reserve chief Jerome Powell’s comments on rates hikes.

However, the S&P 500 and Nasdaq 100 edged lower in Friday’s session even though the US economy added higher-than-expected jobs during November.

Why it matters: The Labor Department said on Friday that nonfarm payrolls increased by 263,000 during November, surpassing market expectations of 200,000. October’s data was also revised higher to show job adds of 284,000, compared to the 261,000 reported earlier.

The latest growth in nonfarm payrolls was the lowest gain since April last year, but continued to signal a healthy labour market, which is much higher than the pre-covid average of 150,000-200,000 job gains per month.

Average hourly earnings rose 0.6% last month, following a 0.5% increase in October. This was the strongest growth in average hourly earnings in ten months. The country’s unemployment rate remained unchanged at 3.7% in November.

Wall Street stocks had notched gains earlier during the week after Powell said on Wednesday that the US central bank intends to slow the pace of its rate hikes as early as in December. The country’s central bank has increased its policy rate by 375 basis points this year to 3.75%-4.00%.

US stocks closed the session off their weakest levels of the day, with major indices dipping at least 1%. However, sentiments remained subdued as a stronger labour market suggests that the Fed has more leeway to continue raising interest rates.

The Dow Jones gained 34.87 points, or 0.1%, to close at 34,429.88. However, the S&P 500 declined by 0.12% to reach 4,071.7 and the Nasdaq 100 fell 0.4% to settle at 11,461.50. These stock indices were weighed down by a decline in the biggest growth and tech stocks, including Apple and Amazon, on Friday amid concerns over rate hikes.

Shares of Ford Motor Company fell around 1.6% on Friday, after the company reported lower vehicle sales for November. Marvell Technology’s stock also shed around 5%, after the semiconductor maker reported weak quarterly results and issued downbeat Q4 guidance.

Despite the losses on Friday, US stocks recorded gains for a second consecutive week, with the blue-chip index rising 0.24% and the S&P 500 adding 1.13%.

What to watch: Fed policymakers are scheduled to hold meetings on December 13 and 14. Investors look forward to minutes from those discussions. Markets also await consumer price data for November, scheduled for release on December 13.

Investors also await data on services PMI, composite PMI and factory orders today. The S&P Global Composite PMI is expected to decline to 46.3 in November, from 48.2 in the prior month. The ISM Services PMI, which declined to 54.4 in October, is projected to fall further to 53 in November. Analysts expect new orders for US manufactured goods to increase by 0.4% in October, following a 0.3% rise in September.

The markets today

The Canadian dollar will be in focus today ahead of building permits data

Context: The CAD/USD forex pair fell on Friday as traders responded to the job reports from both countries.

Details: Canada’s economy added 10,100 jobs during November, compared to market expectations of 5,000 job adds. Although full-time work rose by 50,700 last month, part-time work declined by 40,600.

The country’s jobless rate declined to 5.1% last month, from 5.2% in the previous month and topped market views of 5.3%.

Markets largely expect the Bank of Canada to increase interest rates by 25 bps this week, after announcing a rate hike of 50 bps in October. The country’s central bank had surprisingly lowered the pace of rate-hike after the economy showed signs of a slowdown in growth.

The recent data also showed that the country’s economy expanding by an annualised 2.9% for the third quarter, surpassing estimates of 1.5% growth.

The US also reported better-than-expected nonfarm payroll data on Friday.

The price of crude oil, one of Canada’s major exports, traded lower, exerting pressure on the loonie on Friday. WTI crude oil for January delivery fell 1.5% to close at $79.98 per barrel on the NYMEX.

The CAD/USD forex pair fell around 0.3% to 1.3473 on Friday. For the week, the Canadian currency lost more than 0.6% against the greenback.

What are expectations: Traders await economic data on value of building permits from Canada today. The total value of building permits in Canada, which fell 17.5% to $10.2 billion in September, is expected to increase 0.9% in October.

Other Markets: European trading indices closed mostly lower on Friday, with the FTSE 100, CAC 40 and STOXX Europe 600 down by 0.03%, 0.17% and 0.15%, respectively, and the DAX 40 up by 0.27%.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 134.30 and 134.44 Negative
GBP/USD – 1.2325 and 1.2342 Negative
Gold – 1819.49 and 1821.29 Positive
Platinum  – 1030.81 and 1033.96 Negative
Nasdaq 100 – 11966.73 and 12008.37 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0583, 0.38%) Dow ($34,438, -0.06%) Brent ($86.50, 1.1%)
GBP/USD (1.2337, 0.35%) S&P500 ($4,071, -0.10%) WTI ($80.87, 1.1%)
USD/JPY (134.29, -0.02%) Nasdaq ($11,996, -0.12%) Gold ($1,821, 0.6%)

What else to watch today

Russia’s services PMI and composite PMI, Turkey’s Consumer price index and producer price inflation, South Africa’s S&P Global PMI, Spain’s services PMI and composite PMI, Italy’s services PMI, composite PMI and car registrations, France’s services PMI, composite PMI and retail sales, Germany’s services PMI and composite PMI, Eurozone’s services PMI, composite PMI and retail sales, UK’s new car registrations, services PMI and composite PMI, Mexico’s consumer confidence indicator, Brazil’s services PMI, composite PMI and Central Bank of Brazil’s focus market readout, as well as US total vehicle sales.


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