- US employment data ideal for shareholders as the Federal Reserve looks certain to cut in September.
- The US Unemployment Rate rises to 4.1%, the highest since November 2021, but adds a further 206,000.
- The NASDAQ rises to an all-time high after rising more than 3% over the past week.
USA100
The NASDAQ has been the second-best performing index of the past week, only falling behind the NIKKEI225. Overall, the index rose more than 3.40% as investors price in an interest rate cut for September 2024. The latest NFP data continues to indicate a weakening employment sector which is likely to prompt the Federal Reserve to consider a cut more severely.
Nonfarm payrolls increased by 206,000, down from 218,000 in May, with the private non-farm sector adding 136,000 jobs compared to 193,000 in May. Consequently, the unemployment rate rose to 4.1% from 4.0%, reducing the likelihood of an interest rate adjustment at the Federal Reserve’s July 31 meeting to 6.7%. However, the possibility of a rate cut in July continues to remain around 75%.
Additionally, the bond market continues to correct downward: 10-year bond yields are at 4.298%, down from 4.484% at the beginning of the month, 20-year bond yields 4.602% after 4.745% a week earlier, and 30-year bonds are at 4.499% from 4.645%. The lower bond yields and weaker US Dollar is known to support the stock market and make it less attractive to investors in comparison to other assets. Bad news has proven to be good news for the stock market, but shareholders may not tolerate weaker earnings data.
Leading the growth in the index are Arm Holdings ADR (+7.72%), Meta Platforms Inc. (+5.87%), AMD Inc. (+4.88%), and GlobalFoundries Inc. (+4.65%). On Friday 82% of the stocks within the NASDAQ ended the day higher. However, during pre-trading hours a large percentage of the most influential components trade lower today. Once the US session opens, investors will be keen for stronger bullish sentiment amongst individual components in order to reinforce the current bullish trend.
Lastly, investors will also start closely evaluating earnings reports as they are released. The first quarterly reports will be made public on Friday. Currently investors are pricing a positive earnings season which has added almost a further 10% over the past 2 months. A key factor for volatility over the next 2 weeks will be the US inflation rate on Thursday. Analysts expect inflation to drop from 3.3% to 3.1%.
Buy signals are likely to remain strong, as they have throughout the day, if the price remains above $20,435.00. However, if the price declines below $20,402.34, investors potentially may halt short term bullish trades.
Michalis Efthymiou
Market Analyst
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