General Market Analysis 03/05/2024
US Stocks Rally After Fed – Nasdaq up 1.5%
US Stock indices rallied strongly in the first full day of trading after the conclusion of the latest Fed meeting assisted by another good earnings result in the tech sector, this time from Apple. The Dow gained 0.85%, the S&P 0.91% and the Nasdaq took out the day’s honours rising 1.51%. The dollar fell against most of the majors, the Dxy losing 0.35%, once again with the Jpy seeing the biggest move. US treasury yields pulled back further, the rate-sensitive 2-year dropping 5.2 basis points to 4.887% and the 10-year drifting off 0.8 of a basis point to 4.583%. Oil prices remained steady near recent multi-week lows, with Brent trading around $83.67 and WTI at $78.95 on the NY close and Gold dipped lower, losing 0.8% on the day, closing at $2,303 per ounce.
From the Fed to Non-Farms
Investor focus will move swiftly in the sessions ahead from the reaction to the latest Fed meeting conclusion to the key update on the US job market. Jerome Powell’s message on Wednesday that despite recent higher data prints, the next move for rates will likely be lower and will be tested sooner rather than later. With the Fed clearly data-dependent, this NFP release will immediately test that guidance and a higher print could throw recent relief rallies back in investors’ faces. The market is currently pricing in just 35 basis points of cuts in for 2024 and if inflation remains relatively high in line with a strong job market then we could very quickly be looking at 2025 for the first cut – and of course, if it starts to push back higher, then the fears of a rate hike in the medium term could rise again from where they are still lurking just below the surface of investor confidence.
Non-Farm Payrolls Day
It really will be all about the Non-Farm Payrolls data for most of global market participants today with little else to distract investors from the event calendar. There is of course the continued chance of official action in the Jpy but most traders feel that the Japanese authorities will be happier with recent Yen appreciation – this of course could all change with a stronger US data print. There is nothing of note on the macroeconomic calendar in the first two sessions of the day and many are expecting them to be the calm before a storm of volatility that should occur on the US open with options pricing expecting over 1% swings for the major indices. The focus will be on the non-farms data soon after the New York opening and this will be followed by the ISM Services PMI number but expect big moves if the headline print is significantly off from the expected 238k increase.
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