The main focus of the day is February US non-farm payroll report, with the market anticipating headline job growth of 200k. Unemployment rate is expected to hold steady at 3.7%. Attention is particularly focused on average hourly earnings, anticipated to grow by 0.2% mom, amidst a backdrop of mixed employment indicators from related data sources.
The manufacturing sector, as represented by ISM manufacturing employment index, witnessed a decline from 47.1 to 45.9, while the services sector, through ISM services employment figure, also saw a decrease from 50.5 to 48.0. ADP private employment report indicated a modest job growth of 140k. There was a slight uptick in four-week moving average of initial jobless claims from 208k to 212k. Together they suggest the labor market’s resilience may be cooling.
These indicators collectively temper expectations for a significant upside surprise in the NFP data, while wage growth presenting an unpredictable element as usual.
Investors are particularly interested in how the payroll data might reinforce the likelihood of a June rate cut by Fed. A favorable set of data supporting this case would at least align Fed with its projected path of three rate cuts this year, with the other two in Q3 and Q4, as in the latest dot plot projections.
S&P 500 closed at new record high overnight as its recent uptrend continued. For now, outlook will stay bullish as long as 5056.82 support holds. Next target is 138.2% projection of 3808.86 to 4607.07 from 4103.78 at 5206.91. Firm break there will pave the way to 161.8% projection at 5395.28. Nevertheless, considering bearish divergence condition in D MACD, break of 5056.82 should indicate short term topping, and bring deeper pullback first.
Dollar Index’s close below 102.90 support overnight argues that rebound from 100.61 has completed much earlier than expected at 104.97. Risk will now stay on the downside as long as 55 D EMA (now at 103.69) holds. Deeper decline would be seen back towards 100.61 support, aligning with rally in stock markets. But strong support should emerge around 100 psychological level to bring rebound, to extend medium term range trading.
