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- The Dow Jones declines to its lowest level since 11th November 2023. The NASDAQ declined 1.75%, the Dow Jones declined 1.48%, the SNP500 by 1.40%.
- On Thursday, Semiconductors and chip supplying companies took the biggest hit within the stocks market. Advanced Micro Devices declined -8.26% and Nvidia Corp by 3.44%.
- Only 11% of the USA100’s individual components held onto their value on Thursday.
- The US employment data significantly beats expectations putting more pressure on the Federal Reserve to not cut interest rates.
USA30 – NFP Data Indicates a More Hawkish Fed!
The NFP and US employment data causes the price of stocks to now trade slightly lower than the day’s open price. The Non-Farm Payroll reads more than double Wall Street’s expectations and is also higher than the previous month. In addition to this, the salary growth continues to remain higher than what the Fed would like and the US Unemployment rate declines from 3.9% to 3.8%.
The employment data, particularly the NFP employment changes reading of 303,000, continues show resilience in the employment sector and the wider economy. This factor also indicates that inflation data may read higher and that energy prices will remain high. As a result, the Federal Reserve is less likely to cut interest rates which makes stocks less attractive. Economists advise the news does not indicate that stocks will “crash”, but that they may witness pressure leading up to earnings.
At the moment, most of the Dow Jones’s individuals’ components (stocks) are trading higher, but investors will be eager to see the performance once the US trading session opens. At the moment, technical analysis continues to point towards a downward trend. The price remains below the “neutral” level of the RSI and below the 75-Bar EMA. The price of the USA30 trades below the VWAP and Cumulative Delta figures indicate sellers are active. Fundamental elements also indicate a downward trend including bond yields which are trading 74 points higher. The more expensive US Dollar is also known to pressure the stock market, but investors will monitor investor reaction after the market open.
The only concern for investors speculating a downward direction is if the lower price will prompt investors to enter at a better entry point. This is possible and some investors may deem the stronger data positive and increase their risk appetite. However, this can only be confirmed by the upcoming quarterly earnings data.
EURUSD – Will the Fed Opt to Delay Rate Adjustments?
The EURUSD trades lower after the latest employment data. Economists are now contemplating whether the Dollar will continue its trend as the Fed are likely to turn more hawkish than the ECB. This will depend on if the Federal Reserve will opt not to adjust interest rates in June 2024. Investors will now turn their attention to next week’s US inflation data. If the inflation rate increases in value, even if only by 0.1%, the possibility of rate cuts will quickly start to fade.
Michalis Efthymiou
Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
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