Wall Street Reacted Well to the Strong US Jobs Report, but Inflation Update Looms
NAS100 Analysis
Friday's US jobs report showed the robust addition of 253,000 payrolls in April, while the unemployment rate ticked back down to its five-decades low of 3.4%, only a couple of days after Chair Powell had spoken of an "extraordinarily" tight labor market. [1]
Stock Markets typically react negatively to such strong employment data, since they call for more monetary restraint by the central bank. With the Fed having opened the door to a pause of its aggressive tightening cycle though, markets seemed to view the data as a sign against recession, boosting NAS100 on Friday.
The tech-heavy index was also helped by higher Q1 iPhone sales against a battered market [2], which sent Apple's stock up nearly 5% on Friday, after the earnings release. Also a boon for Wall Street, was the easing of fears around regional banks. The Spdr S&P Regional Banking Etf (KRE.us) fell to nearly three year-lows last week, but rebounded on Friday with gains in excess of 6%.
Concerns however persist, with high profile investors Cathie Wood, tweeting that the banking crisis "is not over" and Elon Musk of Tesla Motors Inc appearing to agree [3]. Furthermore, risks around the US debt ceiling mount and Treasury Secretary Ms Yellen reiterated that the government would be unable to pay its bills in early June, speaking on ABC's "This Week". [4]
Markets now turn to Wednesday's Consumer Price Index (CPI) as inflation has been cooling, but remains well above the Fed's target and core readings have been particularly sticky. Even though investors reacted positively to Friday's robust jobs report, wages increased, which does not help efforts to bring inflation down.
The technical outlook of NAS100 has not changed, since bulls clinched new 2023 highs and remain in control, with the ability to push towards 13,724. We remain cautious though about taking it out and looking towards 14,302.
Despite Friday's rally, NAS100 had a mixed week and has been facing headwinds for the past month or so, with the CPI inflation report looming. There is still risk for a breach of the EMA200 (at around 12,900), but the downside seems well protected and weakness below the daily Ichimokou Cloud (12,400-50) has higher degree of difficulty.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 08 May 2023 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20230322.htm | |
| Retrieved 08 May 2023 https://www.apple.com/newsroom/pdfs/FY23_Q2_Consolidated_Financial_Statements.pdf | |
| Retrieved 08 May 2023 https://twitter.com/elonmusk/status/1655328415761793027 | |
| Retrieved 26 May 2023 https://abcnews.go.com/Politics/week-transcript-5-7-23-treasury-secretary-janet/story |
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