Markets are awaiting today’s US non-farm payrolls release, with little doubt that hiring had slowed meaningfully in May amid heightened tariff threats and elevated uncertainty. The key question now is just how sharp the slowdown was.
Consensus forecasts see NFP at 130K, unemployment steady at 4.2%, and average hourly earnings rising 0.3% mom. Recent labor indicators have painted a dismal picture. ADP private employment came in at just 37k, a stark miss. ISM Manufacturing employment stayed subdued at 46.8 and the Services component barely rose back into expansion territory at 50.7. Meanwhile, 4-week average of jobless claims has crept up to 235k.
While a modest softening in job growth would likely be tolerated as a natural response to macro headwinds, any significant downside surprise could reignite recession fears. An NFP reading below 100K could provoke a sharp risk-off response in equities. However, such a result would likely weigh further on Dollar, as markets would begin pricing in earlier Fed rate cuts in response to labor market deterioration.
Technically, S&P 500 extended the near term rise from 4835.04 this week, but continued to lose upside momentum as seen in D MACD. This rise is seen as the second leg of the corrective pattern from 6147.43. Hence, while further rise cannot be ruled out, given that S&P 500 is now close to 6000, upside potential is limited. On the other hand, break of 5767.41 support will signal that a short term top was already formed. Deeper pull back should be seen back to 38.2% retracement of 4835.04 to 5999.70 at 5554.79, with risk of bearish reversal.
