• 313 days Will The ECB Continue To Hike Rates?
  • 314 days Forbes: Aramco Remains Largest Company In The Middle East
  • 315 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 715 days Could Crypto Overtake Traditional Investment?
  • 720 days Americans Still Quitting Jobs At Record Pace
  • 722 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 725 days Is The Dollar Too Strong?
  • 725 days Big Tech Disappoints Investors on Earnings Calls
  • 726 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 728 days China Is Quietly Trying To Distance Itself From Russia
  • 728 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 732 days Crypto Investors Won Big In 2021
  • 732 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 733 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 735 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 736 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 739 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 740 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 740 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 742 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Stocks, Bonds, USD: What Rate Hike?

The US July jobs report was strong, or at least clearly better than the June report. 215K in NFP, 2.1% average hourly earnings y/y, unemployment rate unchanged at 5.3% and the participation rate also unchanged at 62.6%. The big rally in the US dollar was completely eroded, with EURUSD clawing back all of the 120-pips it lost immediately after the release. The only currencies not to end higher against the USD were CHF (due to renewed SNB jawboning), CAD (disappointing CAD jobs) and GBP and SEK.

Stocks, Bonds, USD: What Rate Hike?
Larger Image

Yields fall for 4th straight week

Our interpretation of the US jobs report is that it is strong enough to openthe door open for a September rate hike (in the event that August figures arestrong across the board), but not sufficiently strong to eliminate the debate,and thereby maintaining the probability for the Fed to hold in September andwait until December, for which more data will be required.

Consequently, US bond yields fall for the 4th straight week, testing below their 55 and 200-week moving averages. The 2.15% support should likely hold for now, but if the bond market is supposedly pricing higher chances for a September hike, then falling yields imply either the bond market does not agree, or/and it is anticipating slowing growth and weakening inflation ahead.

And what would happen to the existing bullishness in bonds by speculators, highlighted in our piece from earlier this week.

Into the weeklies for stock indices

It's time to ignore the daily chart and turn to the weekliesfor the Dow Jones Industrials Index and S&P500.  While the S&P500retests its 200-DMA, the DJIA has already fallen below both its 55 and 200-DMA, trading3.0% below the 200-DMA, the farthest away since November 2012—the yearwhen Apple began a 45% decline off its highs. The DJIA is also alreadytrading below its 55-WMA, dragged down by Chevron, Caterpillar, Exxon and Dupontbeing the worst performer in the index over the last 4 weeks.

Whether this means the next stop in the S&P500 is 2048, or the next stop in the DJIA is near its 100-WMA at 16,956, remains to be seen. Interestingly, both levels correspond to key levels of support. As long as hawkish members of the Fed continue to hint at rising odds of an autumn rate hike, stocks will not be helped.

This month will be filled with muscle-flexing speeches from most FOMC members. And stock won't like it.

 

Back to homepage

Leave a comment

Leave a comment