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Will Nonfarm Payroll Save the Stock Market?

Miguel A. Rodriguez
Miguel A. Rodriguez
06 October 2023

Stock markets returned to the downward path yesterday after a short relief. Market interest rates stayed stable even though weekly jobless claims remained low. Now markets are waiting for the nonfarm payroll figure to decide on their sentiment. 

Market interest rates remain stable

After a brief relief for markets in the middle of the week, the stock market returned to the downside yesterday.

However, market interest rates (treasury bond yields), which continue to be the main factor guiding the performance of most assets, slowed the bull’s run and remained unchanged. The 10-year bond was at 4.72%.

This was the state of the market yesterday even though the publication of weekly jobless claims showed levels remain low, which indicates a strong labour market.  

Nonfarm payroll out today

As the nonfarm payroll (NFP) figure is to be published today, the jobless claims data is of great importance as it is thought to provide an indication of the payroll data result.  

Due to the wait of the employment figure today, markets maintain a negative bias until that state of the US labour market is confirmed. If the data shows a weakening in employment, this could stop the market interest rates from falling further in the short term. For now, if this happens, it could be the only factor that would end the collapse of the stock markets.

Price of oil fell on release of EIA publication

The price of oil, diesel and gasoline all dropped yesterday. This was good news for the economy as it helped to reduce inflation. The price of oil fell to $7 from the previous day’s close.  

The reason behind this substantial drop was the release of the gasoline inventory figure by the EIA at the close of markets on Wednesday. According to the report, gasoline reserves increased by 6,481M barrels, the largest increase in inventories in almost two years.

The data is especially significant because it came out during the period of the year when consumption is high. This period is known as ‘gasoline season’. This is seen as a potential downward trend in demand because of high prices and the slowdown of the economy.  

The market immediately reacted with strong sales of oil futures, which has technically led it to a highly vulnerable situation.

The bullish trend line on the daily chart has been broken down and is now trading below the 0.618% Fibonacci Retracement Level of the last bullish leg. 

oil graph october 6 2023.png

Oil monthly chart, October 6, 2023. Source: CAPEX.com WebTrader.

Key Takeaways

  • The stock market fell yesterday after the weekly jobless claims showed levels remain low.
  • Market interest rates were unchanged.
  • US weekly jobless claims report showed that levels remain low.
  • Nonfarm payroll data today is expected to clarify the state of the US labour market.
  • Oil fell to $7 yesterday after the release of the EIA publication showed gasoline reserves increased by 6,481M barrels.

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Sources: Bloomberg, Reuters 

 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.