- US employment data expected to influence US stocks, the Dollar, and Commodities.
- Analysts expect the US to have added a further 168,000 employed persons and the Unemployment rate to rise to 3.8%.
- The USA100 is close to completing its worst week in over 12 months as analysts expect rates to remain high.
- Analysts downgrade Apple and Tesla stocks, applying more pressure on the USA100.
The USA100 ended the day 0.65% lower and has now declined for a fourth consecutive day. Only the US30 was able to hold onto gains, but even the US30’s components struggled with 50% of the stocks ending the day lower. However, the US technology market rose consecutively for the last seven weeks of 2023, so many traders are now questioning why US stocks are struggling this week.
USA100 – Technology Stocks Decline Ahead of the US Employment Data Release!
This week the USA100 has fallen almost 3.70% which will be the largest decline since December 2022, unless the asset can regain some “lost ground” in this afternoon’s session. The downward price movement is largely due to the strong employment sector, which may keep rates higher for longer. In addition to this, expectations that certain companies are likely to underachieve in this quarter’s earnings weaken demand.
The Federal Open Market Committee’s Meeting Minutes signaled the central bank is likely to stick to a pause possibly until the second or third quarter of 2024. Nonetheless, the CM Exchange Fed Watch Tool indicates there is a 62% chance of a hike in March 2024. On the other hand, economists now advise this is unlikely. For this reason, technology stocks have come under pressure which may continue if this afternoon’s employment data reads stronger than current expectations.
Another negative factor is analysts downgrading influential tech stocks, such as Apple and Tesla. Due to this Apple stocks have fallen 6.30% this week and Tesla almost 10%. These two stocks alone hold 12.78% of the NASDAQ. Furthermore, Bond Yields again rose above 4.00% for the first time since dropping below this level. The 10-Year Bond Yield is up 0.023% this morning which could also possibly pressure stocks. Particularly if today’s Non-Farm Payroll figure reads higher than 175,000.
Of the top 20 most influential stocks within the USA100, only 7 held onto their value. This is not adequate to drive a bullish trend but is an improvement compared to Tuesday and Wednesday. However, of main importance will be the price movement after the release of the US employment data at 15:30 GMT+2.
In terms of technical analysis, the price is also seeing a decline due to consecutive increases which bring fears the asset is overpriced or not at a competitive entry level. Indicators continue to point towards a short-medium term downward price movement as it has since January 2nd. The price is trading below the “neutral” level on the RSI, below the VWAP and below the 75-bar-EMA. However, the asset has formed a bullish crossover on smaller timeframes meaning the price is not currently declining in the ultra-short term. If the price declines below $16,262.91, bearish signals may become active again.
Crude Oil – Oil Prices Rise as Tensions in the Middle East Remain High!
The price of Crude Oil is not seeing a clear direction as the NASDAQ has over the past month as well as this week. The asset is instead experiencing impulse waves and correction in both directions and most swings are “short-lived”. This is due to investors believing the asset is trading around its true value based on currency market conditions. However, plenty of volatility continues to provide signals for short-term trades.
The commodity is supported by certain factors from the past 24 hours such as the closing of the Libyan oil production market and fields for the day. Also, the price is supported by tension rising in the middle east after explosions in Iran by Islamic State Terrorists. However, similarly to all commodities and tradable assets, Crude Oil will largely be influenced by today’s NFP data. If the data triggers a more expensive Dollar and lower risk appetite, oil prices could potentially decline. Whereas a weaker Dollar is known to support oil prices. Nonetheless, traders should be cautious of volatility and unorthodox price movements.
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Michalis Efthymiou
Market Analyst
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The United States has been at the forefront of the global economy for decades, with its stock market reflecting its success. The USA100, also known as the S&P 500 Index, is a leading indicator of the US stock market’s performance. However, recent events have put this index on the brink of a potential downfall. With the release of the NFP (Non-Farm Payroll) report, all eyes are on the USA100. Will today’s NFP push it over the edge? Let’s dig deeper into this topic and explore the potential factors at play.
Understanding the USA100 and NFP
Before delving into the potential impact of NFP on the USA100, let’s first understand what these terms mean. The USA100 is an index that measures the stock performance of the top 500 companies in the US, representing 80% of the overall stock market value. These companies are from different sectors, such as technology, healthcare, and energy. The USA100 is a key indicator of the health of the US economy and is closely watched by investors and economists alike.
On the other hand, the NFP report is released by the US Bureau of Labor Statistics every month, and it measures the number of jobs added or lost in the US in the non-farm sector. This report is a crucial economic indicator as it reflects the strength of the labor market and, in turn, the economy. Strong job growth is usually associated with economic expansion, while job losses can be indicative of a slowing economy.
The Current State of the USA100
The USA100 reached an all-time high in February 2020, but the COVID-19 pandemic caused a massive market crash, with the index dropping by 34% in just a few weeks. Since then, it has seen a steady recovery, but the recent events have put it on edge again. Inflation concerns, rising bond yields, and the ongoing pandemic have all contributed to the USA100’s volatility.
The USA100 had been on an upward trend in the first quarter of 2021, reaching new record highs in April. However, May saw a sharp decline, and it is currently facing its worst month since October 2020. The NFP report for April, released in early May, showed a significant increase in job creation, adding 266,000 jobs as compared to the expected 1 million. This was a huge disappointment for investors and added fuel to the already existing volatility.
Factors that Could Push the USA100 Over the Edge
The USA100 is a complex index, with multiple factors impacting its performance. The NFP report is just one of them, but it can definitely have a significant impact on the index. Here are some other factors that could potentially push the USA100 over the edge in the coming months.
Inflation Concerns – With the US economy reopening and the massive government stimulus, inflation concerns have been on the rise. The Federal Reserve has maintained its stance of keeping interest rates low and allowing inflation to run hot, but any signs of higher inflation could lead to an increase in interest rates, which could negatively impact the stock market.
Rising Bond Yields – The US 10-year Treasury yield has been on an upward trend, reaching a high of 1.7% in March. Higher bond yields can lead to higher borrowing costs for companies, which could weigh on their profits and, in turn, the stock market.
COVID-19 Variants – Despite the ongoing vaccinations, the threat of new COVID-19 variants remains. The Delta variant, in particular, has been a cause of concern and could potentially lead to stricter lockdowns and disrupt economic recovery efforts.
What Happens If the USA100 Falls?
If the USA100 continues its downward trend and falls, it could have ripple effects on the US economy and the global market. A falling stock market could lead to reduced consumer spending, which could have a detrimental impact on the economy. In turn, this could lead to businesses cutting costs and laying off employees, further weakening the job market.
Moreover, a falling stock market could also affect investor confidence, leading to a decrease in investments and potential repercussions for retirement and pension plans.
Tips for Investors
For investors, the current state of the USA100 is definitely something to keep an eye on. Here are some practical tips to consider while navigating through these uncertain times.
Diversify Your Portfolio – As with any investment, it is crucial to have a diverse portfolio to mitigate risks. This means investing in different sectors and not solely relying on the USA100.
Stay Informed – Stay updated on the latest economic news and market trends. This will help you make informed decisions about your investments.
Be Patient – Markets will always experience ups and downs, and trying to time them can be tricky. A long-term investment approach can help you weather volatility and potentially benefit from any future market recoveries.
The Bottom Line
The USA100 is currently on the brink, and the impact of the NFP report on it remains to be seen. As an investor, it is essential to stay informed and make well-informed decisions about your investments. While the volatile market may seem daunting, it can also present opportunities for savvy investors. But remember, always invest with caution and never put all your eggs in one basket.
In conclusion, the USA100 may be facing challenging times in the months to come, but with careful planning and a diversified portfolio, investors can weather the storm and potentially benefit from the eventual market recovery. As for whether today’s NFP will push the USA100 over the edge, only time will tell.
