US Futures Falling Ahead of Inflation Report
Stocks Roiled by Jobs Surprise
US stock futures are falling today ahead of the keenly anticipated May inflation report. Fed rate hike expectations have jumped on the back of Friday’s stronger-than forecast US jobs data. The headline NFP reading for last month was seen rising to 175k, well above the 85k the market was looking for, above the prior month’s reading which was revised higher form 112k to 172k. With the jobs picture in the US much stronger than initially thought, continued inflationary pressures are holding much higher risks. Rate hike expectations have jumped accordingly with the market now pricing in a more than 70% chance of a hike by year end, up from around 50% prior to the release. Stocks were seen falling sharply on Friday as USD soared and markets reacted to the shift in sentiment from traders.
US Inflation Today
Looking ahead today, stocks are vulnerable to further downside if US inflation is seen jumping above 4% as expected. Headline annualised CPI is expected to jump to 4.2% from 3.8% prior marking the highest US inflation since Q2 2023. If the expected increase is confirmed, or surpassed, this will be firmly bullish for USD and heavily bearish for stocks with rate hike expectations moving forward towards a possible September/October hike. Pricing for a September hike is currently around 40% and October just above 50%. If we get strong inflation data today and this pricing lifts, US stocks are likely to push much deeper near-term as traders move back into defensive position and USD rallies.
Technical Views
ES (Mini S&P Futures)
The reversal from record highs has seen price breaking down out of the bull channel and below both 7,537.75 and 7,362. While below here and with momentum studies bearish, risks of a much deeper drop towards 7,038.50 are rising near-term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.