US Stocks Rally After Strong Jobs Data – Nasdaq up 1%
US stock markets rallied strongly again yesterday after US jobs data came in stronger than expected and the Republicans got the tax bill through Congress. The Dow added 0.77% to come within touching distance of a record high, while the S&P and Nasdaq gained 0.83% and 1.02% respectively to again record new all-time high closes. US Treasury yields jumped after the data came out, pushing out any hopes of a July rate cut, with the 2-year up 9.5 basis points to 3.880% and the 10-year up 6.9 basis points to 4.346%. The dollar also pushed back higher off annual lows, with the DXY up 0.36% to 97.10. Oil prices were quieter, fading the recent rally as traders priced in possible OPEC+ production increases, with Brent down 0.30% to $68.90 and WTI down 0.67% to $67.00 a barrel. Gold also took a hit on the resurgent dollar, down 0.93% to $3,325.56 an ounce.
Strong Jobs Number Takes July Cut Off the Table
Last night’s strong jobs numbers in the US have now all but taken a July rate cut for the Fed off the table. The Non-Farm Payroll number came in at +147k vs an expected +111k, and the unemployment rate surprisingly dropped to 4.1% against an expected rise to 4.3%, confirming that the US employment market is proving resilient in the face of trade tariffs, for now. Chances of a July rate cut fell from 24% to 5% overnight, with the likelihood of a hold back up to 95%, as traders priced in the new information in light of the Fed Chair’s comments earlier in the week that the FOMC will remain data-focused. A 25-basis point cut is still very much in play for September, however, although markets are now only pricing in a 64% chance against 74% just a week ago. CPI data is now the next cab off the rank in 10 days’ time in terms of data releases, and unless that has sunk significantly, we can look for rates to remain where they are until September 17 at the very least.
Quiet Trading Day to Close Out the Week
Traders are expecting markets to quieten down as we progress through the trading day today, with US markets closed for the long July 4th holiday weekend and no major data releases or central bank updates scheduled. Asian markets are likely to start on the front foot as they react to the better jobs numbers in the US and another strong day on Wall Street. It should be a similar story in the European session today, although as always, traders will be keeping a wary eye on the newswires for anything fresh out of the Middle East. The New York session should also be a quiet one with the US closed for its long weekend holiday; however, traders will be cautious as we move through the day, with liquidity dropping especially in the last few hours of the day and the potential for updates out of the White House that could see exacerbated moves in the thin conditions.
