Wall Street: US markets dip after mixed jobs report, ahead of CPI data

[MongiIG]

A mixed February jobs report and Nvidia's sell-off have US equity markets on edge before the CPI announcement. With the Fed's rate decisions in the balance, all eyes are on the upcoming data.

 

Source: Bloomberg

 

Indices Consumer price index S&P 500 United States Stock market Federal Reserve

Written by: Tony Sycamore | Market Analyst, Australia

 

Publication date: Monday 11 March 2024 05:07

US equity markets took a hit last week, sliding from record highs in the wake of a mixed jobs report. Investors in Nvidia, seeing a 5.55% drop, raced to sell off their shares before the upcoming U.S. CPI report.

The details of the non-Farm payrolls report showed that the US economy added 275k jobs in February, beating forecasts for 200k. However, the upside surprise to the headline number was more than offset by a downward revision in job gains over the prior two months of 167k, and a rise in the unemployment rate to 3.9% from 3.7% prior. Average hourly earnings slowed to 0.1% MoM, which saw the annual rate ease to 4.3% YoY from 4.5%.

The jobs report revealed sufficient signs of moderation to maintain, for the time being, the anticipation of three Federal Reserve rate cuts this year, aligning with the Fed's projections. However, the continuation of these projections into the Fed's March summary of economic forecasts hinges largely on Tuesday's CPI report.

What is expected from US CPI (Tuesday, 12 March at 11.30pm)

The expectation is for headline CPI to rise by 0.4% MoM in February, which would see the annual rate remain stable at 3.1%. Core CPI is expected to rise by 0.3% MoM, which would see the annual rate cool to 3.7%.

If the core CPI number is much hotter than outlined above because the January New Year price rise effects don’t fall out as expected, there is a chance that three dots could become two dots in the Feds March SEP. This outcome would likely be poorly received by equity markets.

Core CPI chart

 

Source: TradingEconomics

S&P 500 technical analysis

Last week, a "loss of momentum" candle formed in the Nasdaq cash and the S&P 500 cash.

While this occurrence in isolation certainly doesn't guarantee a pullback, we note that it occurred at new highs, on bearish divergence, and in the area of a possible Wave V high within our preferred Elliott Wave Framework. A combination that piques our interest.

From here, if the S&P 500 cash were to see a sustained break of uptrend support at 5090ish, and then below recent lows at 5060/40ish, it would warn that a deeper pullback initially towards 4900 is underway. Until then, the path of least resistance will remain higher.

S&P 500 daily chart

 

Source: TradingView

Nasdaq technical analysis

Last week, a "loss of momentum" candle formed in the Nasdaq cash and S&P 500 cash.

While this occurrence in isolation certainly doesn't guarantee a pullback, we note that it occurred at new highs, on bearish divergence, and in the area of a possible Wave V high within our preferred Elliott Wave framework. A combination that piques our interest.

From here, if the Nasdaq cash were to see a sustained break of uptrend support and recent lows at 17,800/750ish, it would warn that a deeper pullback initially towards 17,000 is underway. Until then, the path of least resistance will remain higher.

Nasdaq daily chart

 

Source: TradingView

• ^{Source: TradingView. The figures stated are as of 11 March 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.