U.S. Equity Markets closed slightly lower on Friday after a trading session that saw plenty of two-way price action in response to the hot Non-Farm Payrolls report, which also heavily weighed on bonds and gave a rally to the U.S. Dollar. Stocks had clawed back losses on the economic growth prospects in response to the solid labour market report (note both Atlanta Fed and NY Fed raised their GDP tracking estimates), offsetting some fears of a softening labour market. The hot report however does give the Fed more time to be patient before lowering rates, which saw T-notes tumble across the curve with the front-end and belly underperforming. Money markets now only fully price just one rate cut by year-end, vs 2 rate cuts priced pre-data; there is still around 50% probability of two cuts in 2024. The hot jobs report set the tone of trade for the day while crude prices ultimately settled flat to slightly lower with some remarks regarding the increased supply from Russian deputy PM Novak and comments on Ukraine Peace talks from President Putin kept the crude complex offered, as did the surging buck. Antipodes were the FX laggards although metal prices also took a beating in response to the higher yields in the US. Attention now turns to the US CPI and FOMC with accompanying dot plots on Wednesday. Within the establishment survey, headline NFP was hotter than all analyst forecasts at 272k, rising from April’s (revised down) 165k, printing above the 185k consensus; note, the most optimistic forecast was for 258k. There was a huge jump in private payrolls to 229k, above the 170k forecast and prior 158k. The wage metrics were also hot, rising to 4.1% Y/Y from an upwardly revised 4.0%, above the 3.9% forecast, with M/M earnings rising 0.4% above the 0.3% forecast and prior. Within the household survey, the Unemployment rate ticked up to 4.0% from 3.9%, despite expectations for this to be unchanged. However, this was likely due to a decent drop in the participation rate, falling to 62.5% from 62.7%. Aside from the Unemployment rate (which can be somewhat looked through given the drop in participation), the jobs report was very hot with both NFP and wages coming in above expectations, adding to inflationary concerns. The hot labour market report is at odds with some of the softer reports we have seen recently (falling JOLTS, rising jobless claims, soft ADP), and therefore this gives the Fed extra time to keep rates on hold whilst they assess if inflation returning to target in a sustainable manner. Attention turns heavily to this week’s US CPI report to see if inflation progress is returning, stalling, or moving in the wrong direction. The US Fed and Dot Plots post CPI will also be key. Note, Fed Chair Powell has said before that the Fed would be prepared to act if there was an unexpected weakening of the labour market, but the May NFP report shows anything but a weakening. Nonetheless, analysts are concerned of a slowdown in the jobs market ahead – Pantheon Macroeconomics suggest that most indicators point to a summer slowdown. Markets now price in just 40bps of easing by year-end, vs 50bps pre data. On Thursday, the ECB cut rates for the first time since September 2019, lowering the deposit rate by 25bps to 3.75%. Within the accompanying statement, the main highlight was that the “Governing Council is not pre-committing to a particular rate path”. Furthermore, the ECB reiterated its pledge to “keep policy rates sufficiently restrictive for as long as necessary”. With regards to its assessment of the economy, from a qualitative perspective, the statement read that “despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year”. For the accompanying macro projections, 2024 and 2025 headline and core inflation forecasts were raised, with the 2026 headline print held at 1.9%. From a growth perspective, the 2024 GDP forecast was raised by more than expected, and 2025 was lowered as expected. At the follow-up press conference, President Lagarde remarked that she would not say that the ECB is in a ‘dialling back phase’, but there is a strong likelihood that the ECB is dialling back. With regards to the unanimity of the decision, Lagarde said that all but one governor backed the decision to lower rates; it was later revealed by Reuters that Austria’s Holzmann was the lone dissenter, voting for an unchanged policy rate on account of the increase in inflation projections. Elsewhere, Lagarde made the point that the ECB is far from the neutral rate and refused to commit to deciding on rates only on projection round meetings but noted that policymakers do have more data available at these meetings. Overall, market pricing has moved in a slightly more hawkish direction given the lack of an explicit endorsement for another near-term rate cut, with October now no longer fully priced for a rate reduction, and the probabilities around a December cut are a coin-flip (vs. circa 56% pre-release). The latest ECB sources via Bloomberg and Reuters had both suggested that a July rate cut is unlikely, although Bloomberg said September was unclear, while Reuters sources suggested the focus is now on September. One Reuters source added “a rate cut would be warranted in September if the ECB’s inflation forecast for the last quarter of 2025 remained where it has been for some time, that is at 1.9%-2.0%.” Meanwhile Oil closed flat consolidating its recent rebound from four-month lows, while a stronger Dollar saw Gold bashed on Friday closing of with a loss of 2.7%.
To mark my 3000th issue of TraderNoble Daily Commentary I am offering a special 2-Year Rate of Euro 2750 for my Platinum Service which includes 1 to 4 updated emails throughout the trading day to demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoble.com for details
For anyone following my Platinum Service it made 52 points on Friday and is now ahead by 541 points for June, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 points, after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 0.11% lower at a price of 5346.
The Dow Jones Industrial Average closed 87 points lower for a 0.22% loss at a price of 38,798.
The NASDAQ 100 closed 0.11% lower at a price of 19,000.
The Stoxx Europe 600 Index closed 0.22% lower.
This Morning, the MSCI Asia Pacific closed 0.6% higher.
This Morning, the Nikkei closed 0.55% higher at a price of 38,703.
Currencies
The Bloomberg Dollar Spot Index closed 0.80% higher.
The Euro closed 0.6% lower at $1.0801.
The British Pound closed 0.4% lower at 1.2721.
The Japanese Yen fell 0.3% closing at $156.72.
Bonds
Germany’s 10-year yield closed 10 basis points higher at 2.62%.
Britain’s 10-year yield closed 7 basis points higher at 4.26%.
U.S.10 Year Treasury closed 12 basis points higher at 4.43%.
Commodities
West Texas Intermediate crude closed 0.03% lower at $75.53 a barrel.
Gold closed 2.7% lower at $2299.10 an ounce.
This morning on the Economic Front we have Euro-Zone Sentix Investor Confidence at 9.30 am. The only data of note is a three-year Treasury Auction at 6.00 pm.
Cash S&P 500
The S&P made a new all-time high at a price of 5375 on Friday. This move higher was attended by negative breadth and a negative NYSE up/down volume ratio. The McClellan Oscillator closed at -93 which is incredible when you consider that both the NDX and S&P made new highs on Friday. While these Indexes are close to all-time highs, the Russell 2000 closed at its lowest level in over a month. The gap between these Indexes continues to widen, with the Russell essentially flat for the year so far. Friday’s NFP data on the surface blowing away all estimates, but under the hood a bad joke with part-time workers making it look rosy while full-time jobs are tanking as gains come from a birth/death model plug, again making one wonder what is real and what is not. Both the Dollar and Treasury Yields rose hard which should have hit the S&P hard but did not. Following the NFP release, the S&P traded lower to my 5325-buy level before rallying 50 Handles. This move higher saw my revised 5339 T/P level triggered and I am now flat. This morning the S&P is following European Indexes lower, trading at 5336 as I go to press. The S&P has short-term support from 5299/5315 where I will be a strong buyer with a lower 5283 ‘’Closing Stop’’. I will now lower my sell level to 5388/5408 with a 5421 ‘’Closing Stop’’..
EUR/USD
The Euro has opened soft this morning following results from the European Elections which forced Franc President Macron to dissolve the French Parliament and call a snap election. This move lower saw the Euro hit my buy range for a now 1.0785 long position. I will add to this position at 1.0705 while lowering my ‘’Closing Stop’’ to a price of 1.0655. I will now lower my T/P level to 1.0840. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
It took a while but finally we saw the expected rally in the Dollar following a hotter than expected NFP Report. This move higher saw my 104.50 T/P level triggered on my latest 104.10 long position and I am now flat. Today, I will again be a buyer on any dip lower to 103.70/104.40 with a higher 103.15 ‘’Closing Stop’’.
Cash DAX
My DAX plan worked well as the market sold off to my 18460-buy level before rallying over 100 points. This move higher saw my revised 18492 T/P level triggered and I am now flat. Today, I will again be a buyer of the DAX on any further move lower to 18280/18360 with a now lower 18195 ‘’Closing Stop’’.
Cash FTSE
For the third consecutive trading week the FTSE has traded in narrow ranges. This morning the FTSE is following the DAX lower, hitting my 8175-buy level. I am still long, and I will add to this position at 8115 while leaving my 8055 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 8220. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
I am still flat the Dow as the market never came close to my buy range. Ahead of the Fed and key CPI data this week, I will now lower my Dow buy level to 38260/38520 whole leaving my 38095 ‘’Closing Stop’’ unchanged. If I am taken long, I will have a T/P level at 38710. I still do not want to be short the Dow at this time.
Cash NASDAQ 100
The NDX made a new all-time high at 19113 on Friday, just falling short of my 19170-sell level and I am still flat. I will now lower my sell level to 19100/19250 with a lower 19405 ‘’Closing Stop’’. I still do not want to be long the NDX at this time. If this view changes, I will be back with a new update for my Platinum Members.
March BUND
Bund Yields followed U.S Treasury Yields higher. The sell-off in the Bund saw the market hit my buy range for a now 130.40 long position. I will now add to this position on any further move lower to 129.70 while leaving my 129.15 ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 130.90. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Wrong! Gold hit a Friday early Friday at 2387 before falling over $90 into the close. Ahead of the NFP data, I lowered my Gold buy level which was triggered for an average price at 2315. Unfortunately, I did not lower my buy level enough and I was stopped out of this trade at 2299 and I am still flat. This morning Gold is trading at 2291. Gold has strong support from 2263/2279 where I will again be a buyer with a lower 2249 wider ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2298.
Silver Rolling Contract
Silver has traded in a wild 200-point range since Thursday’s Daily Commentary. Silver got hit hard on Friday, hitting my latest buy range for a now 29.80 long position. I will add to this position at 29.00 while leaving my 28.35 tight ‘’Closing Stop’’ unchanged. I will now lower my T/P level to 30.40. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
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