Pre-Market: Stocks Jump After “Perfect” Employment Report

Jobs Friday turned out to be ideal for equity bulls as non-farm payrolls beat the consensus estimate by a healthy margin, with a 313,000 figure, while wage growth came in slower than expected according to the government employment report. This combination is great because it cools down inflationary fears, while maintaining the sustainable growth narrative.

As always, there is a catch though, as if Treasury yields continue to climb, and for now, the bond market’s reaction points to that, stocks could still remain shaky, especially that one weaker earnings data point won’t change the Fed’s supposedly hawkish stance. That said, if this is a beginning of a trend of easing wage pressures, it might as well sustain the “Goldilocks” economic conditions for a while

S&P 500 Futures, 4-Hour Chart Analysis

The initial reaction of Wall Street has clearly been positive, with all the risk assets that we closely track showing a relief before the bell. The major stock indices are trading around 0.5% higher, with almost all of the gains coming from after the Jobs Report.

With the S&P 500 trading above the $2735 level, the short-term picture is bullish, but given the still present divergences, we would only play this setup with small positions. We still expect a re-test of the correction lows in the coming weeks, and a swift reversal below $2735 would present a good entry point for bears.

DAX, 4-Hour Chart Analysis

European and Asian stocks still don’t share the enthusiasm of the US market, as this week’s bounce seems to be fading away despite the positive initial reaction the US employment report. Today’s US session could be a game changer for the short-term setup, and we will keep a keen eye on the re-emerging negative divergence.

Dollar Up Against Yen and Euro, Risk-On Assets Rebound

USD/JPY, 4-Hour Chart Analysis

As Treasury yields are higher thanks to the good payrolls number, and despite the wage growth miss, the Greenback is mixed against the majors, with the Yen losing the most ground amid the initial risk-on shift.

The positive reaction is also clear among the recently weak risk-on currencies, as both the Aussie and the Canadian Dollar are up, even as the trend is far from being reversed. The EUR/USD pair is basically unchanged despite the volatile price action, and we have to wait and see how the rising yields will shape forex markets today and going forward.

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Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.