Daily Market Comment – Stock markets get smoked ahead of US payrolls

  • Epic turnaround for stock markets, Nasdaq loses 5% as Fed dust settles
  • Funds blowing up, deleveraging, or traders saying Powell must do more? 
  • Sterling sinks after BoE, US employment report the main event today 

Equity market mayhem

What an epic turnaround for Wall Street. After stock markets rallied like there was no tomorrow in the aftermath of the Fed meeting, where policymakers decided to ‘go slow’ with rate increases, the wheels suddenly came off. The Nasdaq closed down by 5%, without any clear catalyst behind this dramatic reversal.  

There are several narratives doing the rounds. Some suggest this is a mass deleveraging event as big players head for the exits, others believe it reflects forced liquidations driven by hedge funds blowing up, while another school of thought says the market is puking in response to a Fed policy mistake. 

The market-implied probability for a 75 basis point rate increase in June, which Powell effectively ruled out, currently stands around 80%. Meanwhile Treasury yields have stormed higher, especially at the longer end of the yield curve. Bond traders are saying the Fed will be forced to strike harder now, otherwise it will need to use a sledgehammer later. 

Generals getting shot

This particular sell-off felt like an earthquake because the mega-cap tech generals were annihilated too. Amazon (-7.5%), Tesla (-8.3%), Meta Platforms (-6.7%), Google (-4.7%), Microsoft (-4.4%), and even Apple (-5.6%) got smoked. Granted, most of these stocks simply fell back to where they were earlier this week, but when trillion-dollar companies start trading like penny stocks, that spells trouble. 

The atmosphere is disturbingly similar to March 2020, the difference being that neither monetary nor fiscal policy can bail the markets out this time with inflation raging. For the market to find a real bottom, it needs some signs that inflation is starting to cool off first. That would help calm nerves around relentless Fed rate hikes and a ‘hard landing’. 

This puts additional emphasis on the upcoming US employment report, particularly on the wage growth component that is considered an early indicator of ‘organic’ inflationary pressures. 

Deciphering the nonfarm payrolls puzzle

Nonfarm payrolls are forecast to have risen by 391k in April, pushing the unemployment rate down one tick to 3.5%. Average hourly earnings are projected to have cooled a touch on a yearly basis. In terms of any surprises, labor market indicators were mixed during the month. 

The Markit PMIs and jobless claims point to a strong report, whereas the ISM surveys and the ADP print suggest disappointment. Funnily enough, a disappointment - especially on wage growth - may be exactly what’s needed to breathe some life back into stocks. 

As for the dollar, it continues to rampage through the FX market and today’s employment report is unlikely to change that. Even if incoming data dispel some concerns around rapid-fire Fed rate increases moving forward, that may not be enough to derail the US dollar’s uptrend while risk appetite is on shaky ground and every other major economy is in even deeper trouble.

This was perfectly encapsulated by the Bank of England yesterday, which raised interest rates by 25 bps as expected but stressed that risks around economic growth are intensifying. It was a split affair, with three officials voting for a bigger rate increase while two others voted for a pause in the tightening cycle. 

Markets responded by recalibrating the trajectory for UK interest rates slightly lower and sterling paid the price, suffering a double whammy from the cautious signals and the carnage in equity markets that, combined, dragged Cable down to fresh two-year lows.


Technical Analysis – EURJPY bullish correction still at risk

Technical Analysis – GBPUSD capped by 50-day SMA as rebound falters

Technical Analysis – US 500 index defends bullish direction; bias cautiously positive

Daily Market Comment – Dollar smiles after impressive jobs data reinforces Fed bets

免責聲明: XM Group提供線上交易平台的登入和執行服務,允許個人查看和/或使用網站所提供的內容,但不進行任何更改或擴展其服務和訪問權限,並受以下條款與條例約束:(i)條款與條例;(ii)風險提示;(iii)完全免責聲明。網站內部所提供的所有資訊,僅限於一般資訊用途。請注意,我們所有的線上交易平台內容並不構成,也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。


本網站的所有XM和第三方所提供的内容,包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接,皆爲‘按原狀’,並作爲一般市場評論所提供,而非投資建議。請理解和接受,所有被歸類為投資研究範圍的相關内容,並非爲了促進投資研究獨立性,而根據法律要求所編寫,而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊,相關詳情請點擊 這裡查看。

我們運用 cookies 提供您最佳之網頁使用經驗。更改您的cookie 設定跟詳情。