Markets remain very volatile as yesterday's earnings were again disappointing and revenue forecasts also show that Wall Street's largest technology companies continue to expect slow revenue growth.
We saw another strong run in equity markets after investors cheered the Fed's rather dovish policy stance and even Fed Chairman Jerome Powell did not try to convince markets that the Fed will continue to raise rates to fight inflation "no matter what."
However, with the NFP data coming in much higher than expected at 517K (185K expected), the U.S. labor market once again shows how robust, or rather, how tight the U.S. labor market is. The unemployment rate fell to a 53-year low of 3.4%. Here, too, analysts were completely wrong in their assumption, expecting unemployment to rise instead.
The extremely strong U.S. labor market will add to fears that the Fed has more work to do as wage inflation also adds to price pressures, threatening to solidify inflation.
The question now is whether fear of missing out will continue to drive stocks higher, even as there are more signs of serious headwinds - including slower growth for longer and a Fed that will have to use more force to bring prices down.
Commodity prices are currently under pressure from the stronger USD (after the NFP report). I see oil prices still being supported after recent losses, but we also see China reopening optimism waning a bit. The over-optimistic sentiment has now taken a sharp dip, which will likely lead to profit-taking (and a rotation back into defensive stocks) today. Precious metals prices (as well as other risk assets; including growth stocks) are the first to come under pressure due to a stronger USD and higher Treasury yields.
Finally, More investors and of cause, retail traders are positioning themselves in the risk-sensitive AUD, as the very strong US labor market will short-term put pressure on risk sentiment.
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