US Stocks Drop Following Weaker Jobs Data – Nasdaq Down 0.3%
US stock indices drifted lower yesterday as the week’s initial jobs numbers fell short of expectations. The JOLTS Job Openings report showed a fresh three-and-a-half-year low, leading traders to price in a significantly higher probability of a 50-basis point cut from the Federal Reserve in two weeks’ time. While the Dow gained marginally, up 0.09%, the S&P 500 and Nasdaq continued to slide, losing 0.16% and 0.30% respectively. Treasury yields also saw notable declines, with the 2-year yield dropping 10.5 basis points to close at 3.783%, having earlier touched its lowest level since May 2023, and the 10-year yield falling by 6.6 basis points to finish at 3.778%. The US dollar weakened in line with yields, losing 0.3% on the dollar index.
Oil prices experienced a choppy trading day as markets weighed the possibility of OPEC+ increasing production next month. Ultimately, both benchmarks ended the day lower, with Brent down 1.42% and WTI off 1.62%, closing at $72.70 and $69.20 a barrel, respectively. Gold also had a volatile session, hitting fresh two-week lows before bouncing back later in the day to settle at $2,494.80 an ounce.
Fed Rate Expectations in Flux
It has been a volatile week for US markets, made more condensed by a shortened four-day trading week following a long weekend. With the Federal Reserve’s next meeting less than two weeks away, the market is rapidly adjusting its expectations of a 25 or 50-basis point rate cut. Tuesday’s JOLTS Job Openings report came in much lower than expected, at 7.67 million versus the forecasted 8.09 million, causing the odds of a 50bps cut to jump from 37% to 45%. Although this data doesn’t typically have such a pronounced effect on the markets, the size of the drop and current market sensitivity amplified the impact.
Attention now turns to two more key jobs reports before the crucial Non-Farm Payrolls (NFP) data on Friday. With rate expectations driving significant volatility, traders anticipate further market movement in the lead-up to the weekend.
Busy Trading Day Ahead
Investors face a packed trading calendar today, with a focus on US employment numbers in the final session of the week. In the Asian session, attention will be centred on Australia, where Reserve Bank Governor Michele Bullock is scheduled to speak in Sydney. As the RBA remains relatively hawkish, traders expect fluctuations in the Australian dollar during the event.
In Europe, early focus will be on the UK, with Construction PMI figures due for release before attention shifts back to the US. The ADP Non-Farm Employment data and weekly unemployment claims will be released in close succession, and after Tuesday’s market moves, traders are bracing for further volatility. Later in the day, the US Services PMI report and Crude Oil inventory numbers are expected, with oil markets remaining particularly sensitive to any fresh data.
