Stock markets abruptly reversed course and plunged deep in the reds yesterday, after the delayed NFP print for the month of September showcased that the US economy’s labour market remains resilient amidst the Federal Reserve’s restrictive policy campaign.

The US economy managed to add 119k new jobs in September, dispelling calls that saw a mere addition of 40k and outright silenced the camp that expected to see worrisome employment data, that would have validated their views that favoured additional rate reductions from the central bank.

Odds for the 25bps rate cut scenario at the upcoming December meeting have gone down in recent weeks and yesterday they were pushed even lower. Prior to the start of the now longest US government shutdown, money markets were almost fully pricing a rate reduction, assigning at that time a 95% probability for the scenario. Prior to the September NFP print the odds stood at 50% and now post the stronger than expected employment update probabilities range around 29%, showcasing the extreme dilution and shift of opinions in favour of a pause scenario. Recent hawkish rhetoric from Fed official also contributed to the rundown of odds.

At the same time, providing some support in the cases from those participants that continue to see a rate reduction in the December meeting was the uptick of the unemployment rate to 4.4% level, which is the highest in four years.

The greenback is set to finish the week stronger against its major currency counterparts, with the particularly weak Yen bleeding profusely and the Aussie and the Kiwi following suit. US equities show signs of prolonging the fall at today’s premarket session and we must note that after yesterday’s severe plunge, market optimism remains drained and dip buyers may be sitting on the sidelines, awaiting to see more blood before jumping in.

Technical Analysis

NASDAQ Chart Tech stocks go down the drain despite NVDA’s blowout beat, as odds for cuts dissipate after good NFP data

Resistance: 24750 (R1), 25600 (R2), 26200 (R3)
Support: 23850 (S1), 23300 (S2), 22730 (S3)