The S&P 500 has shot higher over the last week. The index was trading near 4,100 last Friday, and has rallied sharply since then. As of the time of this post, it’s putting in a fresh high for the day around 4,365 – that’s a gain of over 6% since last Friday.
A big chunk of the move followed the Fed’s decision on Wednesday to keep rates on hold, together with Fed Chair Powell’s press conference. Investors interpreted Powell’s comments as dovish, although it’s hard to see why, and have decided that the Fed is unlikely to raise rates further. The yield on the 10-year Treasury has fallen sharply since then, dropping from 4.92% on Wednesday to 4.53% on Friday afternoon. This is supporting risk appetite.
The latest update on US Non-Farm Payrolls came out today, and they were significantly weaker than expected, while the Unemployment Rate rose. The news triggered a further rally in stock indices, while the US dollar fell.
For many years, if not decades, Non-Farms was the major economic data release of the month. But it was supplanted by inflation data, specifically CPI, once the coronavirus pandemic was brought under control and the bills started to come through. With inflation coming down, although not beaten, Non-Farms have regained their importance. This is due to the incredible resilience of US employment given the extraordinarily fast and aggressive tightening in monetary policy since March last year. The Federal Reserve fears that this tightness in the labour market will lead to wage demands that will inevitably feed through to higher inflation. Recent indications showing signs of a rise in unemployment have been positively received by equity and bond markets. And so it was today, with payrolls increasing by 150,000 compared to the 180,000 expected. There was also a significant downside revision to the prior month’s data, while the Unemployment Rate ticked up to 3.9% from 3.8%.
The S&P has snapped back from oversold conditions, as can be seen in the MACD. It is also trading back within its trend channel.
A big chunk of the move followed the Fed’s decision on Wednesday to keep rates on hold, together with Fed Chair Powell’s press conference. Investors interpreted Powell’s comments as dovish, although it’s hard to see why, and have decided that the Fed is unlikely to raise rates further. The yield on the 10-year Treasury has fallen sharply since then, dropping from 4.92% on Wednesday to 4.53% on Friday afternoon. This is supporting risk appetite.
The latest update on US Non-Farm Payrolls came out today, and they were significantly weaker than expected, while the Unemployment Rate rose. The news triggered a further rally in stock indices, while the US dollar fell.
For many years, if not decades, Non-Farms was the major economic data release of the month. But it was supplanted by inflation data, specifically CPI, once the coronavirus pandemic was brought under control and the bills started to come through. With inflation coming down, although not beaten, Non-Farms have regained their importance. This is due to the incredible resilience of US employment given the extraordinarily fast and aggressive tightening in monetary policy since March last year. The Federal Reserve fears that this tightness in the labour market will lead to wage demands that will inevitably feed through to higher inflation. Recent indications showing signs of a rise in unemployment have been positively received by equity and bond markets. And so it was today, with payrolls increasing by 150,000 compared to the 180,000 expected. There was also a significant downside revision to the prior month’s data, while the Unemployment Rate ticked up to 3.9% from 3.8%.
The S&P has snapped back from oversold conditions, as can be seen in the MACD. It is also trading back within its trend channel.