Stocks and bonds tumbled on Friday while the Dollar surged in response to the strong US jobs report which saw traders pare Fed rate cut bets. The NFP rose above all analyst expectations while the unemployment rate surprisingly slipped. Money markets started to unwind Fed rate cut bets with only 28bps of easing priced throughout the year, implying just a 12% probability of a second 25bps rate cut. The data also saw a lot of banks revise their Fed calls, notably Bank of America no longer expecting any rate cuts this year. Aside from NFP, the University of Michigan Sentiment Data was also of note given a surge in both the 1 Year and 5-10 Year consumer inflation expectations, which capped the post NFP reversal in T-Notes with bonds sliding into settlement to settle around the post NFP troughs. In FX, the Dollar and Yen outperformed with the jobs report and paring of Fed rate cut bets supporting the Dollar. The Yen managed to outperform with tailwinds from the prior sessions after recent wage data while reports in Bloomberg on Friday suggested the Bank of Japan is still mulling over the rate decision, but it is considering upgrading core inflation forecast for FY24 and 25 amid recent Yen weakness while no decision has been made on raising rates and they intend to wait until the very last moment before deciding on increasing rates. Note, although the Canadian Dollar was softer versus the U.S. Dollar, it was still a relative outperformer after a strong Canadian jobs report. Elsewhere, Crude prices ground higher as they were supported by geopolitical updates and Chinese jawboning, before paring after the aforementioned strong NFP data, but remaining well in positive territory. Precious metals and silver were bid with the downside seen in the immediacy of the jobs report swiftly pared. This week attention largely lies on US CPI to help further shape rate cut expectations from the Fed. The U.S. Jobs Report was strong. The US economy added 256k jobs in December, well above the 160k consensus and above the prior (revised down) 212k, it was also above the top end of the forecast range of 200k. The unemployment rate slipped to 4.1% from 4.2%, despite expectations for an unchanged print while the participation rate was unchanged at 62.5%. The U6 Underemployment rate slipped, falling to 7.5% from 7.8%. Wages rose by 0.3% M/M, in line with the forecast, cooling from the prior 0.4% while the Y/Y print rose by 3.9%, down from 4.0% in November and beneath the 4.0% consensus. The strong jobs report supports the Fed’s view that downside risks to the labour market have diminished, and supports the case for caution with future rate cuts with inflation still above target. The Fed has alluded to two rate cuts in 2025, but since the data traders have pared rate cut bets with the first fully priced Fed rate cut not seen until September, from June before the data. Meanwhile, only 32 basis points of easing is priced through year-end, versus 39 basis points pre data. This implies a 100% probability of one rate cut between now and September, with a 28% probability of a second rate cut by year-end. The strong jobs report gives the Fed the ability to wait before resuming with rate cuts to ensure inflation is on its way back to target. Nonetheless, there is still plenty of data due between now and the March FOMC to help shape future rate expectations with the January 29th meeting largely seen as a skip. Note, December CPI due this week will be key. In wake of the report, several banks have revised their Fed calls. JPMorgan expects the Fed to deliver the next rate cut in June (prev. forecast March). Bank of America thinks the cutting cycle is over and no longer expects more rate cuts. Citigroup expects the next Fed rate cut in May (prev. January). Goldman Sachs expects the Fed to deliver 50bps of easing this year, 25bps in June and 25bps in December (prev. 75bps of easing in 2025). Wells Fargo said a March rate cut is increasingly unlikely. Morgan Stanley however said a March cut is still more likely than not, due to its more favourable inflation outlook. Prelim University of Michigan sentiment for January dipped to 73.2 from 74.0, and beneath the expected 73.8. Current conditions rose to 77.9 (prev. 75.1), while forward-looking expectations fell to 70.2 (prev. 73.3). On inflation expectations, both the 1 Year ahead and longer-term 5-10 year soared to 3.3% from 2.8% and 3.0%, respectively, with the latter climbing to its highest since 2008. The report adds, “For both the short and long run, inflation expectations rose across multiple demographic groups, with particularly strong increases among lower-income consumers and Independents.” In addition, the report notes that assessments of personal finances improved about 5%, while the economic outlook fell back 7% for the short run and 5% for the long run. January’s divergence in views of the present and the future reflects easing concerns over the current cost of living this month, but surging worries over the future path of inflation. Meanwhile Fed Governor Bowman stressed the Fed should be cautious in considering changes to the policy rate and that she supported the December rate cut as a “final step” in policy recalibration, but she could have supported taking no action in December due to lack of progress on inflation and strength in the economy. Bowman stated that the current stance of policy may not be as restrictive as others may see it, and she sees greater risks to price stability, although a deterioration in labour market conditions is still possible. Bowman noted the coming months should bring clarity on the incoming admin’s policies and inflationary pressures, while adding that pent-up demand after the election could also pose inflationary risks. She said the FOMC should refrain from prejudging the Trump administration’s future policies. She added that inflation is elevated, progress has stalled, and she sees upside risks, while wage growth also remains above a pace consistent with the inflation goal. On regulation, Bowman – who has been touted as the successor to Fed’s Barr as Vice Chair of Supervision – said new leadership at banking agencies are expected to translate into a shift in regulatory priorities and approach. She said bank regulators should adopt a more pragmatic approach to policy making, and they should return to tailoring rules to bank size, increasing transparency, prioritising safety and soundness. Elsewhere, Oil surged on Friday ending the session with a 3.5% gain while despite a much stronger Dollar, Gold ended Friday’s session with a gain of over 1%.
To mark my 3100th issue of TraderNoble Daily Commentary I am offering a special 2-Year rate of Euro 2750 for my Platinum Service which includes 1 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 lost 80 points on Friday and is now ahead by 256 points for January after closing December with a gain of 1997 points after closing November with a gain of 3049 points having finished October with a gain of 2179 points. September saw a gain of 4402 points following a 301-point loss for August after closing July with a gain of 1918 points while June closed with a gain of 2074 points, 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 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 1.54% lower at a price of 5827.
The Dow Jones Industrial Average closed 696 points lower for a 1.53% loss at a price of 41,938.
The NASDAQ 100 closed 1.57% lower at a price of 20.847.
The Stoxx Europe 600 Index closed 0.84% lower.
This morning, the MSCI Asia Pacific closed 0.9lost% lower.
This morning, the Nikkei closed 1.05% lower at a price of 39,190.
Currencies
The Bloomberg Dollar Spot Index closed 0.42% higher.
The Euro closed 0.7% lower at $1.0241.
The British Pound closed 1.1% lower at 1.2208.
The Japanese Yen rose 0.4% closing at $157.69.
Bonds
Germany’s 10-year yield closed 5 basis points higher 2.57%.
Britain’s 10-year yield closed 4 basis points higher at 4.84%.
U.S.10 Year Treasury closed 8 basis points higher at 4.76%.
Commodities
West Texas Intermediate crude closed 3.58% higher at $76.57 a barrel.
Gold closed 1.1% higher at $2687 an ounce.
This morning on the Economic front we have no data of note from either the Euro-Zone or the U.K. The only U.S. data of note is the Consumer Inflation Expectations which will be released at 4.00 pm.
Cash S&P 500
Much stronger than expected NFP release on Friday hit the S&P hard, as the market closed 90 Handles lower at a price of 5827 for a not insignificant 1.5% fall. The MAG Seven Stocks continue to lead the market lower trapping a lot of investors at much higher prices as a result. Fears of rising inflation and the grim prospect of no more rate cuts this year have hit American Indexes hard so far in 2025. The S&P has support has its 100 Day Moving Average (5820) and again at the December low of 5800. Both of these support levels were broken overnight so we will have to see where the S&P closes this evening in Chicago to see whether these are real breaks. There is no doubt the S&P is short-term oversold as shown by the RSI while technically I am seeing some positive divergences at these new lows. Remember, the $NYSI is near maximum oversold making it difficult for not to be a buyer for at least a short-term bounce. If this is to be the start of a well overdue bear market, history tells us that we will see plenty of rallies to lower highs as this market unfolds. This is a traders’ dream given the expected volatility where nothing will be straight down at all, but rather a massive trading range opportunity with plenty of long plays in between. Although the VIX closed higher by 8% on Friday, it did rally to a new intraday high on a negative divergence. Following Friday’s NFP release the S&P traded the whole of my buy range for a 5861 average long position before rallying to my 5875 T/P level with a 5880-rebound high. Subsequently the S&P got hit hard. Unfortunately, I emailed my Platinum Members to buy the S&P again and a I am now long at an average rate of 5840 with a 5815 ‘’Closing Stop’’. I will add to this position on any further move lower to 5760. I will have a T/P level on this position at 5850. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
EUR/USD
Following the much stronger than expected NFP Report, the Euro sold off to my second buy level at 1.0230 for a now 1.0265 average long position. I will leave my 1.0165 ‘’Closing Stop’’ unchanged while lowering my T/P level to 1.0330. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Dollar Index
The Dollar surged on Friday, hitting my second sell level at 109.65 for a now 109.30 average short position. I will now raise my T/P level to 108.80 while leaving my 110.15 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash DAX
The DAX missed my 20470-sell level with a 20400 high print on Friday morning before following the American Indexes lower. However, much to my astonishment the DAX continues to be bought on any dip. Given the awful economic backdrop, I do not know how long the DAX can stay bid with the market very close to its November all-time-high. I have no interest in chasing the DAX lower, preferring to leave my 20470/20570 sell level unchanged with the same 20705 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 20400.
Cash FTSE
Despite the increasing rise in 10-year gilts to their highest level since 2008 and 30-Year Gilt Yields to their highest level since 1998 (5.4%) the FTSE is bid, trading 50 points higher from where I marked prices on Thursday despite the weakness of the American Indexes. Remember a market that cannot sell-off on bad news has to be respected. The FTSE is trading at a price of 8240 this morning. I will now raise my buy level to 8120/8190 with a higher 8045 ‘’Closing Stop’’. I still do not want to be short the FTSE at this time. If this view changes, I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow fell almost 700 points on Friday before have a small rally into the close. This move lower has me long at an average rate of 42230 with the same 41895 ‘’Closing Stop’’. The market is severely oversold having fallen over 3300 points since its December high. I will now lower my T/P level on this position to 42300. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Cash NASDAQ 100
Wrong! The NDX led Friday’s sell-off, stopping me out of my 21230 average long position at a price of 20985 and I am still flat. The 50 Day Moving Average at 21075 will be strong resistance on any rally. I will be a small seller from 21050/21200 with a 21305 tight ‘’Closing Stop’’. The 100 Day Moving Average at 20415 will offer support on any further sell-off. As a result, I will be a strong buyer from 20380/20540 with a lower 20215 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 20930. If I am taken long, I will have a T/P level at 20800.
March BUND
No Change: I am still long the Bund from last week at an average rate of 131.80 with the same 132.40 T/P level. Meanwhile, I will leave my 130.65 ‘’Closing Stop’’ unchanged. If any of the above levels are hit, I will be back with a new update for my Platinum Members.
Gold Rolling Contract
No Change: I am still flat Gold despite Friday’s volatile trading session which witnessed plenty of two-way price action. As I am still long Silver, I have no interest in chasing the price of Gold higher. Therefore, I will continue to be a buyer on any dip lower 2575/2591 with the same 2559 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 2603.
Silver Rolling Contract
Having held my 30.95 long Silver position for nearly a month I used Friday’s rally to exit this position at my revised 31.20 T/P level and I am now flat. Given how much Silver has underperformed Gold I will continue to be a buyer of dips, believing that it is only a matter of time before Silver trades back to its May 2011 high of $50. Silver has support from 29.70/30.50 where I will be an aggressive buyer with the same 28.95 ‘’Closing Stop’’. If I am taken long, I will have a T/P level at 31.30.
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