US Stocks Mixed as Tax Bill Progresses – Dow up 0.9%
US stocks experienced a mixed day yesterday as President Trump’s tax bill just passed through the Senate and the first US jobs numbers of the week came in stronger than expected. The Dow closed up 0.91%, whilst mega caps led tech stocks lower, the S&P down 0.11% and the Nasdaq down 0.82%. The dollar drifted lower again, the DXY down 0.13% to 96.66, whilst Treasury yields popped after the data, the 2-year up 5.3 basis points to 3.772% and the 10-year up 1.4 basis points to 4.242%. Oil prices pushed higher again, Brent up 0.76% to $67.25 and WTI up 0.71% to $65.57 a barrel. Gold also added to its recent rise, up 1.08% to $3,338.08 an ounce by the NY close.
Fed Rate Cut Expectations Still Fluid
Most market commentaries at the moment will have a mention of Fed rate cut expectations in one form or another, and participants can expect that focus to increase as we move closer to the end of the month and the 30th July meeting conclusion and rate call. Overnight we heard from Fed Chair Jerome Powell and, as always, he walked a fairly conservative line, advising that the FOMC would continue to monitor data in light of tariff implementation whilst also not taking a July rate cut off the table. The current market pricing has a cut in July priced in at just a 20% chance; however, that jumps to 80% for the September meeting. These odds could change dramatically if we see some big moves in data, and probably the most influential number will come on Thursday with the latest Non-Farms number due out of the US. This will be followed by a final CPI release before the meeting, and if these numbers point in one direction or the other, expect those rate expectations to move—and markets with them.
Markets to Heat Up in Sessions Ahead
Traders are expecting market volatility to take another step higher in the sessions ahead today as investors start to focus in on key US jobs data that is squeezed into a shortened US trading week. Asian markets are looking to open on the front foot today despite a mixed day on Wall Street, and Australian markets will be the early focus with the Retail Sales numbers due out. The market is expecting a 0.3% increase, and anything stronger could take the Aussie dollar further north to hit more fresh annual highs. There is little on the cards in terms of data in the European session, although we will hear closing remarks from Sintra from ECB President Christine Lagarde. The New York session will bring those jobs numbers into sharp focus again with the ADP Non-Farm Employment Change data due out. Market expectations are for 99k new jobs to have been created in June, and traders will be reacting strongly to any deviation to that print, with the data still considered a strong front-runner for tomorrow’s key Non-Farms Payroll number. US crude oil inventory data (exp. -3.5mio barrels) is also due out later in the day, and traders are expecting moves in the major contracts and petro-related products on the back of the release.
