Stock Traders Stay Cautious After Non Farm Payrolls Data

Key Insights

• Non Farm Payrolls declined from 306,000 in May to 209,000 in June. 
• Treasury yields moved lower as traders bet on a less hawkish Fed. 
• U.S. Dollar Index found itself under pressure as traders focused on falling yields. 

On July 7, U.S. released Non Farm Payrolls report, which showed that the U.S. economy added 209,000 jobs in June, compared to analyst consensus of 225,000.

The report highlighted the slowdown in the labor market, although the numbers are still healthy.

The FedWatch Tool indicates that there is a 92.4% probability of a 25 bps rate hike at the next Fed meeting in July. After this hike, the interest rate is expected to stay unchanged at 525 – 550 bps until the end of the year.

The Non Farm Payrolls report did not have a significant impact on the market’s view on Fed’s policy. However, the report had a material impact on Treasury yield dynamics, as the yield of 2-year Treasuries pulled back below the 4.95% level.

U.S. Dollar Index declined below the 102.70 level as traders focused on the pullback in Treasury yields. The weaker-than-expected Non Farm Payrolls report boosts hopes for a more dovish Fed.

Gold rebounded towards the $1925 level, driven by weaker dollar and lower Treasury yields. From a big picture point of view, gold remains stuck in the $1900 – $1935 range.

SP500 is mostly flat after the release of the Non Farm Payrolls data. While lower Treasury yields are bullish for stocks, traders remain worried about the potential slowdown of the economy. Meanwhile, the yield-sensitive NASDAQ has managed to gain some upside momentum and settled above the 15,100 level.

For a look at all of today’s economic events, check out our economic calendar.