US Stocks Hit After Weak Data – Nasdaq Down 2.3%
US stock markets took a step back yesterday as data came in weaker than expected and earnings reports disappointed. Both manufacturing numbers and jobless claims data were below expectations, and Apple reported poor results in China. Major indices gave up most of Wednesday’s gains, with the Nasdaq closing down 2.3%, followed by the S&P and Dow, which lost 1.37% and 1.21% respectively. US Treasury yields fell as the market now anticipates three rate cuts by year-end, with the 2-year dropping 15 basis points to 4.173% and the 10-year falling 12 basis points to under 4% for the first time since early February, closing at 3.985%. Despite the falling yields, the dollar gained 0.3%, while the pound fell after the Bank of England cut rates for the first time since early 2020. Oil prices retreated, with Brent losing 1.6% to $79.52 and WTI dropping 2.1% to $76.31 a barrel. Gold fell off weekly highs, down 0.4% to finish the New York session at $2,438.
Dollar Holds Firm as Yields Crumble
The US dollar held firm overnight despite US Treasury yields falling to levels not seen since early this year. With the exception of the yen, the dollar is now sitting at or near monthly highs against most major currencies. FX traders are expecting more haven flows into the greenback if geopolitical and global growth concerns remain high. Traders are looking at tonight’s US employment data for the next catalyst to move FX. Given the current level of the dollar against some major currencies, they believe the risk is firmly with a surprise topside print in non-farm payrolls that could break support lines and push the greenback into fresh ranges. The Canadian dollar and Swiss franc are already trading at monthly lows, and a stronger number tonight could see the Australian dollar, euro, and pound follow suit.
Focus on US Employment Data Today
Traders are expecting more volatility in the sessions ahead as a long and busy week promises to keep pushing until the close. The Asian session is set to start on the back foot after a turbulent day on Wall Street, and although there is little on the event calendar, traders are expecting moves across products. Key Swiss CPI data is due out early in the European day, but the real focus will be on the US employment data due out early in the New York session. The headline non-farm payroll data is expected alongside the Average Hourly Earnings numbers and the unemployment rate. Expectations are for a 176k increase in non-farm payrolls, a 0.3% month-on-month increase in Average Hourly Earnings, and for the unemployment rate to remain steady at 4.1%. Any significant deviation from these expectations will likely result in more volatility in already sensitive markets.
