General Market Analysis 01/05/2024
US Stocks Hit After Stronger Data – Nasdaq Drop 2%
US Stock markets dived in trading yesterday just 1-day ahead of the latest Fed rate announcement as US data again came in stronger than expected. The Dow lost 1.49%, the S&P 1.57%, and the Nasdaq again took the brunt of the move, dropping 2.04% on the day. US Treasury yields drove higher as data indicated that labor costs rose, the 2-year added 6.8 basis points to trade comfortably back through the 5% level, closing at 5.0413%, and the benchmark 10-year rose 7.8 basis points to 4.6900%. The dollar gained back recently lost ground, the index rising 0.52% against a basket of majors with UsdJpy trading back up at 157.70 on the NY close. Oil prices dropped as hopes of a ceasefire in Gaza increased, Brent closing around $86.33 per barrel and WTI at $81.93 per barrel and Gold took a tumble in line with the stronger dollar and haven selling to fall 1.7% on the day, closing around $2,294 an ounce.
Markets Cautious Ahead of the Fed
US Stock Markets took a step back yesterday as fears of rates remaining higher for longer firmed again after more data indicated sticky inflation conditions in the world’s biggest economy. The Employment Cost Index printed a 1.2% quarterly increase last night against the expected 1%, further confirming inflation is alive and well in the states. Investors now anticipate a more hawkish Fed after their meeting concludes towards the end of today’s trading day. It has been a familiar pattern over the last month as the Fed has become more hawkish with data remaining strong in several sectors. Yields have risen, with the 2-year adding 42 basis points and the 10-year 49 basis points in April and the major indices have fallen, the Dow dropping 5%, followed by the Nasdaq and the S&P which have dropped 4.4% and 4.2% respectively. Today’s Fed meeting outcome should set the tone for the medium term and many on the street fear that a full pivot again from the Fed could see more pain for investors in the weeks and months ahead.
Fed in Focus for Traders Today
It is a huge day ahead for investors today with the Fed meeting conclusion coming at the end of a holiday-affected trading day. The data action starts early in the Asian session with key employment numbers due out in New Zealand in the first hours of trading. Liquidity will be an issue over the course of the day with many major centres experiencing holidays, China has the rest of the week off for Labour Day and European liquidity will take a big hit with many major centres closed for May Day celebrations. The major session of the day will once again be in the US where a heavy data hit is due ahead of the latest Fed rate call. ADP and JOLTS job numbers are due out alongside the Manufacturing PMI data and ISM Manufacturing PMI numbers and then we wait until the end of the session for the FOMC update. Cad traders will also note that BOC Governor Tiff Macklem is due to testify in Ottawa in front of the Senate Committee on Banking right at the end of the session.
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