July 2, 2020

Special Report: US NFP Day Is Here

Special Report: US NFP Day Is Here

The DJIA futures, along with S&P 500 futures, are focused on the mother of all economic numbers, the US NFP. Usually, this number comes in on Friday. But due to a public holiday, in the US, the US NFP number will be released today.

All eyes are going to be on the US unemployment rate, which is currently sitting at 13.3%. Last month, the markets’ expectations were that we are going to get an ugly number, and investors were surprised to see that the US labor market has seen a massive improvement.

This, more or less, changed the sentiment on Wall Street and triggered enormous confidence among traders, and hence, we saw traders buying the US equity markets. The question is, how is the US NFP data going to shape up the day and trend for the rest of the month? We will look into this in a lot more detail later. 

The Dow Jones futures are also focused on positive news. Due to the release of a possible coronavirus vaccine data yesterday ,some stress was relieved regarding the rising Covid-19 cases in the US. However, the reality is that we are still a long way away from an official vaccine, as yesterday’s results are still very much associated with earlier trial data. The odds for any vaccine becoming available are still low for this year. 

The US stock market also has grave qualms about the anchoring tensions between the US and China, over a new national security law in Hong Kong.

The US House of Representatives approved a bill that sanctions those banks that do business with Chinese officials associated in cracking down activists in Hong Kong.

The relationship gauge between the US and China has fallen to a new low, and once again, Beijing will not sit there and not respond to the recent US threats. 

Gold prices have fallen short of touching the critical resistance level of $1,800. The current sell-off is mainly due to two folds.

Firstly, the US ISM manufacturing data released yesterday confirmed a strong recovery. Secondly, the Federal Reserve’s June meeting’s minutes did not confirm that the Fed has any significant concerns about the US economy, as long as the coronavirus situation remains under control.

However, nothing is more important than the US NFP data. This data is coming on the same day when we will receive the initial and continuous jobless claims data for the US economy. Remember, the volume isn’t expected to be very high in the markets due to a long weekend, so a surge in volatility with low volume is likely to produce more wild moves. 

The global stock market recorded a positive day and showed little to no concern about the Hong Kong situation. The Kospi index soared 0.915, the Shanghai jumped 1.62$, and the Nikkei increased by 0.11%. European markets are also picking up the positive momentum from Asia, and they are on track to add more gains.

Here is more on this:

US Stock Market and US NFP 

The forecast for today’s US unemployment rate is for 12.4% while the previous number was 13.3%, There are two possible scenarios that we are going to see, but it is important to keep in mind that both scenarios will be unfolding in a low volume environment due to a short work week as a result of a national holiday. 

Firstly, the US ADP data released yesterday has set the tone for a mediocre number. It confirmed the creation of 2.3 million jobs, less than the initial expectations. If today’s US NFP number shows that the unemployment rate has worsened rather than improved, we could see risk aversion. Speculators are likely to short sell the stock market because it will confirm that the economic recovery is not as strong as previously anticipated.

Finally, if the US unemployment rate falls and no significant downward revision to the May report takes place, investors are likely to feel relieved. US equity market may continue its upward trend. 

DJIA Index And S&P500 Index: Market Breadth

The stock market’s breadth shows bulls have gained more momentum. 33% of the Dow Jones stocks have traded above their 200-day moving average, which is an improvement of 6% from a day earlier. 

The S&P 500 stocks also display strength, and 40% of the S&P 500 stocks are trading above their 200-day moving average, an improvement of 4% (36%) from a day earlier. 

Dow Jones and S&P 500 Futures Today

The Dow Jones futures are trading with caution and are up by 50 points.  

The Dow Jones futures broke the previous day’s high and remained above the 50-day moving average on a daily time frame. This confirms bull strength for the Dow. However, the DJIA price still needs to break above the 200-day moving average. 

The S&P 500 index, which shows better representations of the whole US stocks market, is maintaining its upward trend. The 50-day moving average is about to cross the 200-day moving average while the S&P500’s price is trading above both of these averages. This is an immensely bullish sign, and if the S&P 500 remains above these averages on a daily time frame, we are likely to see a major bull trend

Stock Market Rally 

The S&P500 index maintained its strength yesterday and closed with 0.50% gains. 3 sectors out of 12 closed in negative territory. The real estate and utility sector for the S&P500 performed well yesterday while energy and financial sectors kept the lid on the S&P 500 gains.

The Dow Jones index decided to pause after a stellar quarter and closed lower by 0.30%. 21 out of 30 DJ30 stocks closed in positive territory. 

The NASDAQ composite, a tech-savvy index, closed with the most gains among the other two indices. It recorded gains of 1.21%. 

Coronavirus: California and Arizona 

Coronavirus cases in the US increased further yesterday. California and New York have started to backtrack from their reopening. The indoor dining in California is not allowed after a record number of new cases; New York also implemented the same measures. 

When it comes to coronavirus cases, it is not the number of cases, but rather the hospitalization rate and death rate that matter the most. If hospitals reach their capacity level and have no available beds for coronavirus cases, the situation becomes dangerous. In Houston-area ICU rooms have reached 102% capacity due to a surge in Coronavirus cases. Additionally, Arizona is suffering from record visits to its emergency rooms due to record numbers of Covid-19 cases. This shows how dire the coronavirus situation is in some of the US states. 

Trump Feels “different” About Minimum Wage 

Trump is finally happy with the Federal Reserve’s chairman, Jerome Powell. Trump believes that the chairman has taken appropriate steps to navigate the economy during current difficult times. But Trump doesn’t seem to be pleased about minimum wage; he feels “different” as per his interview on Fox. President Trump said that he will address this issue within two weeks. Perhaps there could be an increase in the minimum wage, another tactic that can help him win the US election. 

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