General Market Analysis – 07/10/24

Markets Surge After Massive Non-Farm Result – Nasdaq up 1.2%

US markets surged on Friday after Non-Farm employment data smashed expectations. The Dow closed at another record high, gaining 0.81%, while tech stocks pushed the S&P and Nasdaq further, closing up 0.90% and 1.22%, respectively. US Treasury yields jumped after the data, reaching levels not seen in two months. The rate-sensitive 2-year yield rose 22.5 basis points to 3.925%, while the benchmark 10-year yield added 13.7 basis points to close at 3.981%. The dollar gained 0.6%, pushing the DXY back up to 102.52 as major currencies entered new ranges. Oil prices closed out their strongest week in a year, with Brent rising 0.6% to $78.05 per barrel and WTI gaining 0.9% to $74.38. Gold had a volatile session, ultimately closing 0.2% lower at $2,649.69 an ounce, weighed down by the stronger dollar.

Fed Rate Cut Expectations Slashed After Employment Numbers

Expectations for a 50-basis-point rate cut from the Federal Reserve in November have plummeted after the strong US employment data on Friday. The headline Non-Farm Payroll (NFP) came in at +254K, far exceeding the expected rise of 140K, causing markets to ease recession fears in the US. Yields and the dollar surged to levels not seen since August. The probability of a 50-basis-point cut now stands at just 8%, down from 30% the previous day. Currencies have shifted back to the middle of recent ranges on longer-term charts. The dollar’s appeal has increased over the past few weeks due to resilient US data—now topped by the NFP result—and safe-haven flows amid escalating geopolitical concerns in the Middle East. Traders expect continued dollar strength in the short term as markets reassess their positions.

Quiet Calendar to Start the Trading Week

The macroeconomic calendar is relatively quiet in the week ahead, with little scheduled for today that could impact markets. However, traders anticipate volatility across all three trading sessions as they digest the surprising US employment data from Friday and monitor updates on the conflict in the Middle East. Both Australian and Chinese markets are closed for holidays on Monday, which could lead to early liquidity issues, especially if the Asian open sees any market gaps. Nothing significant is scheduled for the European session, though a few FOMC members are set to speak later in the day after New York opens. Otherwise, expect traders to respond to flow-driven markets and any developments on the newswires.

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