The Dow Jones Industrial Average and S&P 500 futures are likely to remain sensitive today as traders continue to digest the U.S. jobs report. The U.S. unemployment rate confirmed further improvement, falling to 8.4%. U.S. employers added 1.4 million jobs during August.
The overstretched stock rally may face more challenges while Big Tech stocks remain in focus.
The U.S. Non-farm payrolls data is considered the mother of all economic numbers. This number usually sets the trading trend for the rest of the month. This data’s influence is not only on the U.S. equity markets but also on the forex, commodity, and fixed income markets. This is chiefly because the number is closely watched by the Federal Reserve in the U.S.
The Fed’s monetary policy is largely based on the U.S. labor market’s health. If the labor market continues to improve, the Fed tapers its monetary policy and vice versa.
HARD FACTS ABOUT U.S. ECONOMY
The U.S. unemployment rate declined to a single digit number today. Today’s number came in at 8.4%. The previous reading was 10.2%, and the forecast was 9.8%.
- The U.S. Non-Farm Employment change confirmed the reading of 1.37 million, another drop from the previous reading of 1.76 million. Hospitality and leisure sectors added 174,000 jobs.
- This week we saw the U.S. ADP number confirming job creation of 428K against the previous reading of 212K. The forecast was just over one million.
- The Challenger report also confirmed more improvement and fewer layoffs as compared to the previous reading. The number came in at 116.5% when the last data was at 576.1%.
- The U.S. ISM Non-Manufacturing employment index also confirmed strong reading. It soared to 47.9 while last month’s reading was 42.1.
- The U.S. ISM Manufacturing employment index also exhibited that the U.S. economic health has improved. The reading for this data came in at 46.4. The last number was 44.3.
- Jobless claims fell to 991K from their previous reading of 1.39M. Continuing claims dropped to 13.25M from 15.48M.
KEY FACTS ABOUT U.S. STOCK MARKET
The Dow Jones Industrial Average is back in negative territory for this year, down 0.86%. The index dropped over 1,000 points yesterday but closed off its loss. It finished the day with a loss of 2.78%.
The S&P 500, which is considered a broader representation of the U.S. stock market, has been trading away from its mean price, a 50-day simple moving average. A correction was looming, and yesterday we saw the index dropping 3.51%.
Yesterday, the Nasdaq mainly led the sell off in the U.S. stock market. The tech index dragged the markets lower; it dropped 5.23%. Shares of Big Tech stocks saw major correction, and we may see this trend picking up more steam if traders continue to take profit off the table.
Facebook’s shares, which are up 41% YTD, declined by 3.76% yesterday. The company said it would not allow new political ads on Facebook’s platform the week ahead of the U.S. presidential election.
WHAT TO LOOK OUT FOR
There is also a spillover effect of the U.S. jobs report because the U.S. stocks’ price action also influences global stock markets. If U.S. stocks had closed this week on a positive note and the general sentiment remained intact, which is that there is a gradual recovery for the U.S. economy, the Fed would remain accommodating for a more extended period.
On the flip side, we’re closing this week on a note that says that the U.S. economic recovery is immensely fragile. Investors will like to see immediate help in the form of another stimulus aid package.
The STOCK MARKET SO FAR
The Dow Jones Industrial Average erased its yearly losses earlier this week before the rout began yesterday. The S&P and Nasdaq
Volatility is expected to jump higher this month as summer months are over, and professional traders have returned from their holidays. The VIX, also known as the fear index, advanced 26.46% and closed at 33.60. The index is up 143% year-to-date (YTD).
So far this year, the tech-heavy Nasdaq Composite is up 34.79%, the S&P 500 is holding on to its gains of 6.94% while the Dow is down again by 0.86%.