Nasdaq Index, Dow Jones, S&P 500 News: Labor Market Resilience Puts Rate Cut Bets on Hold

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Published: Jan 4, 2024, 16:03 GMT+00:00

The S&P 500 and Nasdaq react cautiously to resilient labor market data, impacting rate cut forecasts.

Dow Jones, S&P 500 Index, Nasdaq-100 Index

Key Points

Labor market data tempers early rate cut expectations
Wall Street adjusts after 2023 rally, faces early 2024 dip
Treasury yields rise, corporate news impacts market

Current Market Trends

The benchmark S&P 500 and Nasdaq are exhibiting subdued activity in response to today’s labor market data indicating resilience. This strength in the labor market is tempering expectations of early interest rate cuts by the Federal Reserve, leading to cautious trading.

Wall Street’s Recent Performance

After a notable rally in 2023, Wall Street has stumbled in the early days of 2024. The S&P 500 has faced its worst two-day performance since late October, with investors adjusting their positions following the rally driven by rate cut expectations.

Interest Rate Cut Projections and Employment Data

The market is currently pricing in a 66.4% chance of at least a 25-basis point rate cut by March, with a higher probability for May, as per CME Group’s FedWatch tool. The ADP National Employment report showed an unexpected rise in U.S. private employment in December, challenging predictions about the upcoming official employment data.

Treasury Yields and Corporate Updates

Yields on longer-dated U.S. Treasury notes are rising, with the benchmark 10-year note yield approaching 4% after the employment data release. In corporate news, Apple faces a decline following a brokerage downgrade, while Merck gains on growth prospects. The S&P Global’s final PMI reading also influences investor sentiment.

Short-Term Market Forecast: Cautiously Watchful

In the short term, the market appears cautiously watchful, weighing the robust labor data against potential Federal Reserve actions. Investors are particularly focused on the upcoming official employment data and its implications for interest rate decisions. Consumer discretionary and technology stocks are currently leading declines among S&P 500 sectors, indicating a mixed sectoral response to the economic indicators.

Technical Analysis

Daily E-mini S&P 500 Index

The E-mini S&P 500 Index presents a mixed sentiment, combining bullish indicators with potential bearish signals. While the index’s daily price of 4757.25 is notably above both the 200-day (4479.85) and 50-day (4591.29) moving averages, suggesting a bullish trend, the current short-term chart pattern raises the possibility of a rollover to the downside.

This situation indicates that the market might be overstretched above the moving averages, potentially unable to sustain its current momentum. The considerable distance from the moving averages could signal an impending correction or consolidation phase as the market seeks to realign with these key average levels.

About the Author

James Hyerczykauthor

James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.

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