DXY | London Open 08:20:03 (UTC) |
As the trading day on Wall Street came to a close, stocks concluded in a mixed bag. The SPX was unchanged, up 0.03 percent. Meanwhile, the Nasdaq Composite, which is heavily weighted toward technology, rose 0.52 percent. The Dow Jones Industrial Average fell 0.14 percent as cyclical companies underperformed the wider market. The primary variables at work here could have been the continuance of the post-Fed Jackson Hole symposium trade. A softer-than-expected ADP employment report last week backed up Chair Jerome Powell's dovish stance on the job market. Private payrolls increased by 374k in August, considerably short of the 625k consensus. This comes ahead of Friday's nonfarm payrolls report. In other words, markets are more likely to anticipate that the Fed will be hesitant to raise rates soon after unwinding quantitative easing. The latter may be reviving demand for tech stocks, which can be more susceptible to changes in monetary policy assumptions. The real estate sector helped kept the SPX afloat, surpassing the index's other components. This comes on the heels of data released earlier this week showing that US housing prices maintained their steady march higher at staggering rates across the country. On the daily chart below, the SPX future has left a Shooting Star candlestick formation. This is an indication of hesitation, but it does not necessarily imply that a turn lower is in the cards. Traders should keep an eye on how the index performs in the following days. Subsequent downward closing could indicate that a significant decline is on the way. Meanwhile, increasing support from June appears to be pushing the S&P higher. Given the weaker ADP jobs report, Asia-Pacific indices may follow Wall Street's mainly optimistic tone. Traders may price in a softer non-farm payrolls report in the coming days, resulting in less hawkish Fed policy expectations. However, this may result in the markets overshooting a bearish prediction for NFPs. This could result in a ‘buy the rumor, sell the news' scenario for the jobs report. In the meantime, the APAC economic docket is rather quiet. The July trade balance data will be released by Australia. The markets will get a closer look at how severe Covid shutdown regulations impacted the external industry. Given the Reserve Bank of Australia's cautious near-term stance as it monitors data, the ASX 200 could experience some volatility.
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