US Equity Traders Eying NFP Data

As traders continue to digest Wednesday’s hawkish Fed minutes, which caused US shares to retreat, and discuss its implications of the minutes to Fed’s policy tightening, US equity trading has displayed more passive performance. The S&P 500 Index has been hovering around the 4700 level on Thursday between 4670 lows and 4720 highs and at current level.

The index is trading about 0.3% lower on the day. That leaves it roughly 2.5% below the record levels posted near 4820 earlier in the week.

The Nasdaq 100 index, which tumbled more than 3.0% on Wednesday as sharp upside in yields triggered selling what traders refer to as “growth” stocks, including big tech shares, is about 0.2% lower in the 15,700 area. The Dow, which held up comparatively better on Wednesday, dropping just over 1.0%, is underperforming on Thursday and is down about 0.6% but still above the 36K mark.

As yields continue to press higher the S&P 500 financial sectors outperformed and gained nearly 1.5%. The S&P 500 CBOE volatility index or VIX was broadly flat just below 20.00, having risen from around 17.00 when equities sold off on Wednesday.

More Focus On NFP Data
Having largely ignored the week’s busy calendar of US data, equity traders and investors are now turning their attention to the release of the official US labour market report on Friday. With money markets now considering a strong possibility of a first Fed rate hike in March, traders will be looking at Friday’s jobs report through the lenses of whether it could push or hinder the chances of March lift-off.

Fed policymakers in December framed the labour market as making “rapid” progress back to full employment in the pre-pandemic US, even in light of last NFP data of 210000 jobs, Fed said that if this rate of improvement continues, rate hikes will soon be warranted.

The Fed is likely looking through softer monthly NFP figures, regarding the unemployment rate, as a signal of improvement.

Unemployment dropped to 4.2% in November from 4.6% in October. Fed policymakers have acknowledged that the pandemic is holding people back from the labour market, that is to say the scope for large MoM employment gains in the foreseeable future is limited.


Friday’s NFP number could, therefore, back Fed’s continued tapering at a faster pace. Expectations for 400000 jobs in December easily fits this criterion.

If Friday’s jobs report feeds into the Fed tightening fears that have in recent days sent real and nominal yields scorching higher and weighed on equities, the outlook for equities on Friday might turn grim.