US employment data was released today, with non-farm payrolls adding another 390,000 jobs. This comes after an increase of 436,000 jobs in the previous month (from 428,000). Expectations for the month were 325K. Although lower than the previous month, it still represents a solid gain at this stage of the cycle. Since January 2020 just before the impact of the pandemic, the number of jobs gained has almost erased the number of jobs lost.
Other components showed that the unemployment rate remained stable at 3.6% (expected at 3.5%). The participation rate fell from 62.5% to 62.3%, which contributed to the unchanged level of the unemployment rate. The average hourly wage increased by 0.3% against an estimate of 0.4%. Year-on-year came in as expected at 5.2% (vs. 5.5% last month). The underemployment rate fell from 7.0% to 7.1%.
May’s job gain was the slowest pace of growth since April of last year. In detail, jobs fell by -61,000 in retail trade. Leisure and hospitality were the main gainers, with 84,000 additional jobs. Consumers switch from purchasing goods to purchasing services.
More recently, companies such as Twitter, Netflix and Tesla, which Elon is due to say today planned to cut 10% of salaried jobs, said they were looking to cut jobs.
It’s hard to say the jobs data is soft, but let’s say there has been a slowdown in the trend, which is a start.
The market reaction saw stocks move lower and yields higher.
Looking at the main clues:
- The Dow Industrial Average fell -349.4 points or -1.05% to 32,898.90. Last Friday the index closed at 33212.97
- The S&P index fell -68.38 points or -1.64% to 4108.43. Last week the index closed at 4158.33
- The NASDAQ index fell -304.15 points or -2.47% to 12012.74. Last week the index closed at 12131.13
- Russell 2000 fell -14.62 points or -0.77% to 1883.05. Last week the index closed at 1887.85
If you rephrase to put a positive spin on the price action in the stock market, the major indices all closed above their 200 hourly moving average despite the week’s declines.
In the US debt market, yields are rising but have reached the highest levels today. For the week, however, yields rose sharply as traders reconsidered the idea of a break in September:
- 2 years 2.661%, +2.7 basis points. The 2-year yield is up from last Friday’s closing level of 2.484% for a gain of 18 basis points.
- 5-year yield 2.942%, +3.1 basis points. The 5-year yield is up from 2.692% last Friday or 25 basis points
- 10-year yield 2.946%, +3.3 basis points. The 10-year yield is up from 2.743% last Friday or +20 basis points
- 30-year yield 3.094%, +1.5 basis points. The 30-year yield is up from 2.972% last Friday or +12.2 basis points.
In forex, the USD is the strongest of the majors while the JPY is the weakest.
- USDJPY: The USDJPY hit its highest level since May 9 and in doing so broke above the May 11 high at 130.80. The high price today reached 130.973. The pair closes just above the May 11 high at 130.80. On the way up, the price moved above a swing zone between 130.49 and 130.553. This level will be a near risk level on Monday. Staying above is more bullish. At the top, April and May highs at 131.242 and 131.342 are top targets. They also represent 20-year highs for the USDJPY. This week, Microsoft lowered its earnings and revenue expectations due to the rising dollar. With the USDJPY trading near 20 highs, watching this currency is a major problem for multinationals that have not properly hedged their exposure.
- EURUSD: The EURUSD is trading above and below its 100 and 200 hourly moving averages currently at 1.0718. Current prices are trading just around this level and heading into next week’s price action to determine a more bullish and bearish bias. Moving above the moving averages would be more bullish. Going below the moving averages would be more bearish. What is important on the upside today is that the high price has stalled from the high price of May 27th. Holding below the cycle high at 1.07857 from Monday’s trade has given sellers control of the shorter-term bias. However, getting and staying below the 100 and 200 hourly moving averages will still be considered early next week.
- GBPUSD: The GBPUSD is using the 100 hourly moving average as its ceiling both late yesterday and today. This moving average currently sits at 1.25647. The 200 hourly moving averages at 1.25761. Staying below these moving averages gives sellers more control. After the Nonfarm Payrolls report, the price declined to test a swing level at 1.2524. The price bounced higher to retest the 100 hourly moving average one last time before reversing lower and crossing the 1.2524 level. Bearish break. This level will be a near risk level at the start of the trading week. The price closes the week near session lows at 1.2488. On the downside, going below the 38.2% retracement of the rise from the May 13 low at 1.24705 and staying below that level will be key for sellers/bears.
Thank you for your support this week. Have a safe weekend