Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Stocks Retreat, USD Climbs Into ADP Payrolls And FOMC

Published 2017-05-03, 10:00 a/m
Updated 2023-07-09, 06:32 a/m

Stock markets around the world have come under pressure overnight and into this morning. Australia's S&P/ASX fell by 1.0% while in Europe, the Dax, CAC and FTSE are all down about 0.3%.

In the US, Dow and S&P futures are down by 0.1% while NASDAQ futures are down 0.3%. The NASDAQ has outperformed lately and may be finally giving up the rally. The trigger for the downturn may be a negative reaction to Apple (NASDAQ:AAPL)'s earnings report which saw earnings beat the street but iPhone shipments and sales guidance come in below expectations. Facebook (NASDAQ:FB) and Tesla Motors (NASDAQ:TSLA) report today which may show how much interest remains for vrowth plays or if sentiment is turning cautious.

Crude oil has been trading higher overnight with Brent Crude holding $50.00. Traders have taken a cautiously optimistic approach to a bigger than expected decline in US API oil inventories while looking to today's DOE reports for confirmation.

In currency action, the US dollar is up against pretty much everything ahead of today's ADP payrolls and FOMC decision.

Last month, ADP came in strong while nonfarm payrolls were very weak coming in below 100K. This month we could see either a soft ADP figure or a big downward revision to last month. The street is thinking payrolls could fall to 175K from 263K. Between a run of poor hard data like recent GDP, consumer spending and now auto sales reports, the Trump honeymoon effect fading and plus jobless claims starting to rise, I’m thinking we could see a reading of 150K and possibly even lower.

More evidence of a slowing US economy could put the Fed into a spot. Employment is a lagging indicator and should it continue to crack, it could mean that the US economy may have passed its peak for this cycle. Meanwhile, inflation continues to rise even though the Trump tax and spending plans are nowhere near approval or implementation.

At this point, it’s up in the air as to whether the Fed will see the need to raise interest rates again in June. Adding to the volatile mix, however, is comments from President Trump, who, having lost this round of budget negotiations, appears to be setting the stage for a big showdown and favouring a government shutdown in September. This pretty much rules out a September rate hike, so if the Fed doesn't raise in June, they may not get another chance until December. Because of this, Wednesday’s statement could have a significant impact on market sentiment, particularly if the central bank makes any hints about whether it is still on track for a June rate increase or not.

The dollar gains suggest that traders expect the Fed to stay on course for a June rate hike. Traders should note though that recent strength in technology stocks and employment is often a sign we are near the end of a cycle so if these give way it could be a sign of trouble ahead.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.