LiveWire

This week a number of major companies are to report earnings including Walt Disney, Activision Blizzard, Occidental, Take Two, Ralph Lauren, AstraZeneca, and meme stock AMC. There will the US Midterm election results on Tuesday, and more importantly the US CPI report on Thursday. Traders will be on the lookout for indications that price pressures are cooling. Lastly, central banks are expected to speak at various events throughout the week. 

Today the BLS (Bureau of labor statistics) released this month's labor statistics, non-farm payroll which exceeded estimates (261k vs 200k), which suggests that the demand for labor is still strong. In addition, wages increased drastically rising 0.4% from 0.3%. What's strange is that the unemployment rate is up due to a lower participation rate.  Initially the bond market fell, which means the yield spiked and the stock market fell too.

US stocks are rebounding with Nasdaq futures contract up 0.8% this morning. Behind the rebound, the dollar is weakening and investor appetite is regaining momentum on rumors that China could potentially ease its harsh Covid restrictions. We are closely watching the US jobs market report, released an hour before the US market opens. The unemployment rate is projected to tick higher to 3.6%, and non-farm payrolls (NFP) are expected at 200k. A lower NFP number or higher unemployment rate would be positively interpreted for markets, giving reasons to the fed to loosen policy.

The S&P500 is down 0.7% after investors increased their expectations of the Federal Reserve keeping its interest rates higher for longer. Chair Powell’s comments on the future path of interest rate hikes and the tightness of the jobs market are pressuring markets. With the unemployment figures being released tomorrow by the Bureau of Labor Statistics, this will also potentially have an impact on stocks.

The Fed hiked interest rates by 75bps to a baseline rate of 4%, as expected. Stocks exploded higher, reversing the day's losses after investors saw encouraging dovish language in the Fed's FOMC statement. The changes can be summarised in that the Fed will take into account the cumulative interest rates increases, as in it is readying to slow down the pace of hikes. Nonetheless, traders shouldn't expect a significant dovish 'pivot' either, as the Fed remains determined to bring inflation down to 2%. Powell will have a chance to give more details later in his press conference. The 10-year Treasury yields slipped below 4% on the news, helping risk assets stage a rebound.