To The Moon

Where Are We ?

US market performance has been rather mixed for the first 3 days of the week. (see below)

Bull runs for artificial intelligence stocks have slowed to a crawl.

This is because investors were getting worried about:

• Steady & growing spending on AI for a longer time period.

• Returns on investment (ROI) on AI capital expenditures.

The revelations came to light as the Magnificent Seven released their quarterly results progressively, revealing billions of dollars outlay in the name of artificial intelligence.

S&P 500 - Past 5 Days.

• Above is $S&P 500(.SPX)$ past 5 days performances.

• The S&P 500 showed mixed performance during this period, with fluctuations in both directions.

• Investor sentiment was influenced by a combination of factors, including ongoing earnings season, macroeconomic indicators, and market speculation.

All that changed on Wed, 31 July 2024.

To be precise, the upturn happened after 1:42pm when Wall Street has sufficient time to digest all that have transpired, after the FOMC committee concluded their 2 days meeting. (see above)

• The Fed kept interest rate status quo and indicated that inflation is getting closer to its 2% target.

• The FOMC post meeting statement summed up that the risks to achieve its employment and inflation goals continue to move into better balance.

• Fed chair, Mr Powell strongest hint arrived when he said a potential September rate cut would be apolitical.

And just like that, the S&P 500 index ended Wednesday, +1.58% higher at 5,522.30; off its peak of 5,667.56 attained on 16 Jul 2024.

CME FedWatch.

• The latest CME FedWatch tool for September 2024 has evolved too.

• Probability of a -0.25% interest cut has fallen to 86.5% from 94.6% (readings on 20 Jul 2024).

• Probability of a -0.5% interest cut has increased to 13.5% from 4.1% (readings on 20 Jul 2024).

01 August 2024.

Strangely, the euphoria experienced in July 2024 last trading evaporated into thin air on Thu, 01 Aug 2024.

In fact, it turned rancid. (see below)

By the time market called it a day:

• DJIA: -1.21% (-494.82 to 40,347.97).

• S&P 500: -1.37% (-75.62 to 5,446.68).

• Nasdaq: -2.30% (-405.26 to 17,194.15).

Catalysts For Market Fall.

(1) Factored-in interest cut.

The September rate cut, have long been priced in to stocks by traders.

This explained the rising stock prices over the past few months.

Fed chair, Mr Powell basically confirmed as much on Wed, 31 Jul 2024.

(2) Labour market cracks.

Fear is starting to take hold, as concerns mount that the Fed have not acted quickly enough to keep America’s job market in good shape.

This comes as Mr Powell warned on Wednesday that cracks are starting to form in the labor market.

What he said that spooked US market:

• “A broad set of indicators suggest that conditions in the labor market have returned to about where they stood on the eve of the pandemic: strong, but not overheated.”

• With softness comes susceptibility. Mr Powell (now) mentioned that, “downside risks are real.”

Non Farm Payroll report able to stem US market downfall ?

Non Farm Payroll (NFP).

The only thing to (hopefully) restore calm in the US market would be US Jobs report results (Non Farm Payroll) for July 2024.

Economists expect: (according to FactSet consensus)

• Friday’s July jobs report will show a net gain of 175,000 jobs.

• This will be slightly below the average for the past three months.

• At the same time, unemployment rate remains status quo at 4.1%. (see below)

ADP Payroll To Verify ?

Although not entirely an apple-to-apple comparison, could refer to the ADP payroll July 2024 data to get a sense of how the Non Farm payroll is heading. (see below)

ADP payroll is the jobs creation in US private sector and they are released before the NFP report.

History has shown that the payroll patterns are mostly similar in the rise & fall. (see above)

Is this sufficient proof that NFP will be as per forecast ? More importantly, how kindly will Wall Street take to the estimates, should it falls true ?

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• Do you think US Non Farm Payroll report will be able to stop the descend ?

• Do you think this negative market sentiments bring “Buy” opportunity ?

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