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Wall Street ends lower despite strong NFP report

 

Monday, June 06, 2022

The news shaping the markets today

Russian President Vladimir Putin warned the US after its supply of longer-range missiles to Ukraine. Rising geopolitical tensions sent WTI crude oil futures higher this morning.


China’s general services PMI rose to 41.4 in May, from April’s 26-month low of 36.2, lending support to the CNY/USD forex pair.


Australia’s job advertisements rose by 0.4% in May, following a 2.0% decline in the previous month. However, the AUD/USD pair fell slightly in forex trading this morning.


Hong Kong’s S&P Global PMI climbed to 54.9 in May, from 52.7 in the previous month. Despite this being the second straight month of growth in factory activity, the HKD/USD forex pair remained flat.


Saudi Arabia’s S&P Global PMI came in unchanged at 55.7 in May, representing the 21st straight month of growth. The SAR/USD pair remained broadly flat in forex trading this morning.

 

What’s happening: US stocks closed lower on Friday, following the release of the nonfarm payrolls report.

What happened: The Nasdaq 100 lost more than 300 points on the last trading day of the holiday-shortened week, despite stronger-than-expected nonfarm payrolls data for May.

Investors will now focus on this week’s consumer price data, which will provide more insight into the Federal Reserve’s tightening plans.

Why it matters: On Friday, the Bureau of Labor Statistics released jobs report for May, which indicated elevated hiring in the US. The country added 390,000 nonfarm jobs last month, higher than the consensus estimate of 328,000 job adds. However, May’s reading was the lowest monthly gain since April 2021 and also represented a pullback from the 436,000 job additions in April.

Average hourly earnings rose by 0.3% in May, missing expectations of 0.4% growth. The unemployment rate remained unchanged at 3.6%.

Traders shorted stocks on prospects of the Fed continuing its rate hikes, which is likely to have an adverse impact on corporate profits.

Cleveland Fed President Loretta Mester said on Friday that she supports aggressive interest rate increases as there is not enough evidence of inflation beginning to peak.

The benchmark 10-year Treasury yield surged above the 2.9% level, following the release of the US jobs report. Technology stocks moved lower, with Alphabet and Meta Platforms losing around 2.6% and 4%, respectively. Shares of Tesla fell more than 9% after a report showed that CEO Elon Musk is looking to reduce 10% jobs at the company.

The Dow Jones index shed 348.60 points, or 1.05%, to close at 32,899.70 on Friday, while the S&P 500 declined 1.63% to 4,108.54. The tech-heavy Nasdaq 100 fell 2.67% to settle at 12,548.02. For the week, the Dow Jones index and the Nasdaq lost around 1% and the S&P 500 was down approximately 1.2%.

What to watch: Investors will keep an eye on the all-important inflation report on Friday. The annual core inflation rate in the US, which eased to 6.2% in April from the 1982-highs of 6.5% in March, is expected to decline further to 5.9% in May.

The markets today

Bitcoin will be in focus today after trading higher this morning

Context: Bitcoin had struggled to find any direction on Friday, despite a better-than-expected jobs report from the US.

Details: The US dollar index, which measures the greenback’s performance versus a basket of six major currencies, has added more than 13% year to date. The rising US dollar adversely impacts all cryptocurrencies, which are quoted in the greenback and mostly traded against the USDT in the global markets.

The US released upbeat data on nonfarm payrolls on Friday, but the pace of job additions slowed in May, signalling that the Fed’s rate hikes might have started to impact economic growth.

Bitcoin remained below the $30,000 mark following the release of the US jobs data on Friday with traders keeping an eye on the Federal Reserve’s actions. Bitcoin climbed past the $30,900 mark this morning, after a slight decline in the US dollar index.

Ether, the second largest crypto by market cap, rose by more than 3% to $1,866 this morning.

What to watch: Traders will continue to monitor inflation and economic growth data from various countries and actions by central banks to tighten their monetary policy.

Continued tensions around the Russia-Ukraine conflict will also remain in focus.

Other Markets: European trading indices closed lower on Friday, with the DAX 40, CAC 40 and STOXX Europe 600 down by 0.17%, 0.23% and 0.26%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0711 and 1.0720 Positive
USD/JPY – 130.53 and 130.64 Positive
Gold – 1855.16 and 1856.76 Negative
Copper – 4.4132 and 4.4272 Negative
Nasdaq 100 – 12521.88 and 12568.24 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0724, 0.05%) Dow ($32,989, 0.31%) Brent ($120.54, 0.7%)
GBP/USD (1.2493, 0.03%) S&P500 ($4,122, 0.37%) WTI ($119.68, 0.7%)
USD/JPY (130.61, -0.17%) Nasdaq ($12,605, 0.43%) Gold ($1,856, 0.3%)

What else to watch today

UK’s new car registrations, Germany’s car registrations, Mexico’s car production, gross fixed investment and auto exports, Russia’s total vehicle sales, Brazil’s balance of trade and Central Bank of Brazil focus market readout, as well as India’s money supply M3.


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