Market News

The S&P 500, Nasdaq Composite and Nasdaq 100 are moving higher today as investors focus on a combination of continued economic growth, less urgency for another Fed rate hike (just below 20% chance for an October hike now), and optimism surrounding technology and AI spending.

Friday’s weaker jobs report eased concerns about an immediate rate increase, while today’s strong S&P Global services data suggest business demand remains healthy.

For stocks, the attraction is that a cooling labor market does not necessarily mean corporate earnings are about to fall sharply. Continued investment in AI infrastructure and strength in Nvidia (new record - see chart below) are also helping support the heavily weighted technology names.

The caveat is that…

• Prior month nonmanufacturing services PMI 55.4

Details from a ISM

• Services PMI: 54.9. Prior 55.4.

September components compared with August:

• Business activity: 56.5 vs 61.7
• New orders: 59.8 vs 60.9
• Employment: 50.1 vs 47.8
• Prices: 74.0 vs 72.6
• Supplier deliveries: 53.2 vs 51.3
• Backlog of orders: 56.6 vs 55.6
• Inventories: 57.8 vs 56.7
• New export orders: 46.9 vs 56.3
• Imports: 52.9 vs 56.3
• Inventory sentiment: 51.7 vs 54.1

The US services sector continued to expand in September, although the pace eased. According to the Institute for Supply Management (ISM), the Services PMI slipped to 54.9 from 55.4, marking the 27th consecutive month of expansion. The details were mixed: business activity slowed, employment returned to slight expansion, and price…

• S&P global composite Index for September 58.4 versus 50.4 preliminary. Last month 56.0
• Services PMI 58.8 versus 50.7 preliminary and 56.5 last month

Details

• Services PMI: 58.8. Prior 56.5. Strongest business activity growth since July 2021.
• Composite PMI: 58.4. Prior 56.0. Strongest expansion in overall business activity in over five years.
• New orders: Growth accelerated to its fastest pace in four-and-a-half years, led by domestic demand.
• Employment: Fastest service-sector job creation since June 2022.
• Input costs: Inflation accelerated to its highest rate since November 2022.
• Prices charged: Increased at the second-fastest pace in just over a year, behind only July.
• Backlogs: Increased for the 19th consecutive month, with the sharpest…

FUNDAMENTAL OVERVIEW

The Nasdaq has found some support from dovish Fed comments that pushed back against an October rate hike and a softer than expected NFP report that lowered the probability for the central bank action further.

Keep in mind, though, that the geopolitical picture hasn’t changed much as the US-Iran stalemate continues to drag on. There are ominous tensions under the hood as US credit spreads have been widening and that generally preceded stock market’s corrections.

Chart: Nasdaq 100 vs US credit spreads (blue - inverted)

We can see the divergence between credit spreads and the Nasdaq in the chart above. Credit spreads are a useful indicator of financial…

Bitcoin is trading above and below the unchanged level in trading today.   From a fundamental perspective, institutional demand has come back. Spot Bitcoin ETFs took in $2.7 billion in September, and total US spot ETF assets under management now top $111 billion. Wall Street is turning more positive too. Citigroup raised its 12-month Bitcoin target to $113,000 from $82,000, citing stronger crypto activity, a more supportive macro backdrop, and renewed ETF inflows. Helping as well is that the price is back above JPMorgan's estimated production cost of $85,000. That cost estimate is often watched as a rough floor, since miners are reluctant to sell below it.

In contrast to that bias, the macro conditions remain the biggest headwind. High…

When headlines panic over a "weak" jobs report, meaning fewer jobs were added this month than last month, they often ignore one simple fact: the economy might already be full.

If unemployment is already very low, most people who want a job already have one. The country no longer needs to create 300,000 new jobs every single month to recover from a slump.

At that point, the economy only needs to add around 100,000 jobs a month just to keep up with everyday population growth, like new graduates entering the workforce for the first time.

Adding fewer jobs isn't a sign the economy is breaking. It’s simply what a healthy, fully-staffed job market looks like when things level out.

What does the jobs report actually count?

The monthly US jobs report…

The U.S. dollar is mostly higher to start the North American trading week, with gains against six of the seven major currencies. The Australian dollar is the exception, trading modestly higher against the greenback.

U.S. stock futures are implying a lower opening, while Treasury yields are nearly unchanged. The next scheduled test comes from the U.S. services sector, with the final S&P Global services PMI at 9:45 a.m. ET followed by the more closely watched ISM services report at 10 a.m. ET.

Meanwhile, Middle East developments continue to influence the oil outlook. Improving supply is offering some relief, but threats to energy infrastructure remain a risk.

The dollar starts the week on firmer footing

From the dollar’s perspective, the…

FUNDAMENTAL OVERVIEW

USD:

The US dollar has been supported recently despite a dovish repricing triggered by Fed’s Williams and Fed’s Jefferson comments that pushed back against expectations of a rate hike in October.

The main reason might be risk-off flows into the greenback due to European debt concerns. The focus has been particularly on France, where political uncertainty and concerns over the country's large fiscal deficit have pushed French government bond yields higher and widened the spread over German Bunds to its highest level since the eurozone debt crisis.

A stabilization in French spreads could allow some of the euro's risk premium to unwind and…

Markets:

• 10-year Treasury yields flat at 5.277%
• AUD leads, EUR and NZD lag
• Gold up 0.3% to $4,153
• Brent crude up 0.3% to $102.60
• European stocks mostly higher; S&P 500 futures down 0.1%
• Bitcoin up 0.3% to $86,099

It's a brand new week but same old story for markets.

The softer US jobs report on Friday brought some relief to stocks and bonds, and while that hasn't gathered pace today, we're not seeing the broader market mood worsen at the very least.

The bond market remains the key spot to watch and that is keeping the overall mood on edge still. 10-year Treasury yields fell to a low of 5.16% after the jobs data on Friday before quickly rebounding to 5.28%. And as we get into the new week, yields are keeping thereabouts with the long-end continuing…

You're hearing it pretty much everywhere in markets these days, that interest rates are going to stay "higher for longer". But what does it actually mean and more importantly, what does that imply for markets?

The simplest way to think about it is that "higher for longer" doesn't necessarily mean interest rates are going to keep going up. It just means that investors think rates may stay elevated for longer than they previously expected.

Just imagine a situation where markets had been expecting the Fed to start cutting rates early next year. But if inflation remains sticky, the jobs market remains strong and the economy holds up, then traders may start pushing those expected rate cuts further down the road.

That is essentially the "longer"…

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FUNDAMENTAL OVERVIEW

Grayscale's ZCSH ETF recorded approximately $93.6 million of net outflows in the week ending October 2, its first negative week since late August. The increasingly negative geopolitical developments in the past weeks and Fed rate hike expectations might have been behind the outflows since most of the Zcash-specific good news have been already priced in.

Moreover, Zcash activated NU7 on public testnet on October 4, slightly ahead of the previously expected October 6 date. The upgrade reduced target block time from 75 seconds to 25 seconds, while also introducing a Network Sustainability Mechanism and new limits for shielded transactions. Developers …