Sea of Red in Markets After US Data – NASDAQ Down 2.5%
US stock markets were hammered again on Friday after employment data came in much lower than expected and the unemployment rate jumped to 4.3%. The major indices all finished significantly lower, with the Nasdaq losing 2.43% on the day, followed by the S&P which dropped 1.84%, and the Dow which fell 1.51%. US Treasury yields experienced another substantial hit, with the 2-year trading under 4% for the first time since May 2023, closing down 27.2 basis points at 3.888%, and the 10-year losing 17.6 basis points to finish at 3.801%. The dollar also followed yields lower on Friday, having held firm for most of the week, with the DXY dropping 1.1% by the close. Oil prices saw further selling pressure as global growth concerns accelerated, with Brent dropping 3.40% to $76.81 a barrel and WTI losing 3.66% to trade down to $73.52 a barrel. Gold also fell from weekly highs after the data, losing 0.5% on the day to close around the $2,432 level.
Is a Recession Now Looming for the US?
It was an incredibly volatile week for US markets, and the major updates are now prompting investors to question whether the Fed will need to ease interest rates much faster than expected to avoid a recession. As anticipated, the Fed held firm on Wednesday, but 48 hours is a long time in markets, and successive weaker prints in manufacturing data on Thursday and employment data on Friday now have many thinking that the FOMC should have acted this month. US Treasury yields had been retreating for most of the week and went into a bit of a tailspin for the last couple of trading days, with the 2-year losing over 42 basis points and the 10-year dropping 29 basis points—both now firmly trading under the 4% level. The market is now pricing in a 71% chance that the Fed will cut by 50 points in September, and if they do only go by 25 points as has been consistently expected for the last few months, there could be much more pain ahead for the US economy.
Volatility to Remain High Despite Quiet Calendar
Traders are expecting volatility to remain high in markets today despite a quiet calendar day and indeed, week ahead. It was another turbulent day on Wall Street on Friday, and Asian markets have already seen some sharp moves after the open this morning. However, it’s a relatively quiet start to the week in terms of economic event risks, with little tier 1 data on the calendar in the Asian session, and this will do little to change the overall market sentiment initially. There is nothing of note due out in the London day either, but we do have PMI data scheduled to come out in the US once the New York session kicks off, with any further weak outcomes likely to add to investor concerns.
