US indices slid on Friday after NFP data showed unemployment falling to historic lows, but closed the week on a positive footing. Job numbers showed a deceleration in overall gains, but the unemployment rate fell to 3.5%, diminishing chances of a smaller than 50-basis points hike from the Federal Reserve.
As a result, the Nasdaq index crashed by -3.8%, S&P by -2.8% and DJIA by -2.1%. Friday’s NFP trimmed much of the week’s strong start where indices had pulled off incredible rallies of 7.80%, 6%, and 6.05%, respectively.
Key factors for today
– “Hot” jobs market revives the bearish case as key indices near multiyear lows again
-Friday’s data boosts probability of 75-basis points Fed hike to 80%
-The rising dollar remains a big concern for central bankers as foreign reserves deplete
-Risk of official war declaration rises after the Crimean bridge bombing
-Biden’s new marijuana regulation might help boost pot stocks
US Jobs Numbers Affirms Hikes
Friday’s NFP came in close to expectations at 263k but marked the slowest pace since April 2021. Unemployment dropped unexpectedly from 3.7% to 3.5% due to lower labour participation, allowing the Fed to keep hiking. Chances of a 75bps hike at the next Fed meeting rose to 80% according to Feds funds futures, supporting bonds and the dollar to the detriment of the stock market.
Reserves keep falling
Reports from several countries showed another drop in foreign reserves as central banks fight the rising dollar. Separately, it was reported that central banks were stepping up gold buying. Gold was up 4.25% at $1730/oz mid-week but lost 1.10% after Friday’s NFP, fluctuating around $1700/oz.
Geopolitical concerns rise
Following the OPEC+ production cut announcement, Brent moved back to $98/bbl for a bit, but it’s slowly pulling back. The US President warned that nuclear tensions were at the highest since the Cuban Missile Crisis, as he spoke of a potential “armageddon” to Democrat donors.
Over the weekend, the bridge connecting Crimea to Russia was hit with an explosion, demolishing one of the roadways and damaging the train link to Crimea. Russia is expected to retaliate on Monday.
Cannabis firms get Presidential Boost
President Biden surprised with pardons for convicts of simple cannabis possession and sought to reclassify the drug’s legal status for regulation. The President urged states to take similar measures. Tilray Brands and Canopy Growth Corp stocks surged on the news.
Movers and shakers
-DexCom rose 7.3% after analyst upgrades at Stiefel and Bank of America
-CVS fell 10.5% following reports that it is in exclusive negotiations to buy Cano Health. Earlier, it was reported that Humana and other bidders were looking to make a bid instead
-Northrop Grumman advanced 2.2% after a successful launch of two telecom satellites
-AMD dropped 13.9% as a follow-up from earnings cut after the market close on Thursday, dragging on the semiconductor segment
-Levi Straus lost 11.7% after missing on the top line and cutting its outlook
On the docket
-ECB’s Philip Lane is expected to speak, but his influence has fallen due to lost arguments over aggressive hikes
-Fed’s Evans and Brainard are due to speak and are likely to embrace the Fed’s hawkishness
-The World Bank and IMF annual meetings kick off with a unique mix of events to discuss, including UK Chancellor Kwarteng’s policy.
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