Market Review: October 04, 2024

The data released on Friday, October 4, 2024, centered on labor market indicators, which showed robust job growth and wage increases, as well as insights into speculative positions in commodities and financial markets. The positive surprise in nonfarm payrolls and better-than-expected average hourly earnings highlighted ongoing strength in the labor market. The data offers critical insights into the economic outlook and inflation pressures, influencing expectations for future monetary policy actions.

Today's Event Overview:

• Average Hourly Earnings (MoM) (Sep): Wages increased by 0.40% month-over-month, surpassing the forecast of 0.30% but below the previous month’s 0.50%. This suggests solid wage growth, supporting consumer spending capacity.
• Average Hourly Earnings (YoY) (Sep): On a year-over-year basis, earnings rose by 4.00%, exceeding the forecast of 3.80% and the previous 3.90%, indicating sustained wage pressures over the past year.
• Nonfarm Payrolls (Sep): Payrolls increased by 254K, significantly above the forecast of 147K and the previous month’s 159K, reflecting strong job creation.
• Participation Rate (Sep): The participation rate held steady at 62.70%, unchanged from the previous month, indicating stability in the labor force.
• Private Nonfarm Payrolls (Sep): Private-sector employment rose by 223K, well above the forecast of 125K and the previous 114K, indicating robust hiring outside of the government sector.
• U6 Unemployment Rate (Sep): The broader U6 unemployment rate decreased to 7.70% from the previous 7.90%, indicating a reduction in underemployment.
• Unemployment Rate (Sep): The headline unemployment rate declined to 4.10%, better than the forecast of 4.20% and the previous 4.20%, signaling an improvement in the labor market.
• U.S. Baker Hughes Oil Rig Count: The oil rig count decreased to 479, down from the previous 484, potentially indicating a slowdown in U.S. oil production.
• U.S. Baker Hughes Total Rig Count: The total rig count also fell slightly to 585 from the previous 587, reflecting similar trends in drilling activity.
• CFTC Crude Oil Speculative Net Positions: Speculative positions in crude oil rose slightly to 159.6K from 158.6K, indicating a modest increase in bullish bets on oil.
• CFTC Gold Speculative Net Positions: Net positions in gold fell to 299.9K from 315.4K, suggesting reduced speculative interest in gold.
• CFTC Nasdaq 100 Speculative Net Positions: Speculative positions in the Nasdaq 100 increased slightly to 16.1K from 16.0K, indicating a marginally more positive outlook for tech stocks.
• CFTC S&P 500 Speculative Net Positions: Speculative positions in the S&P 500 shifted to 7.5K from -35.8K, reflecting a significant turnaround towards a more bullish stance on broad U.S. equities.

Impact Analysis:

• Impact on USD:
• The stronger-than-expected nonfarm payrolls and wage data provide robust support for the USD, as it indicates a healthy labor market and potential inflationary pressures. This data increases the likelihood of continued monetary tightening by the Federal Reserve. The improvement in the unemployment rate further bolsters the dollar’s outlook, as it signals ongoing economic strength.

• Impact on Gold:
• The positive labor market data is generally bearish for gold, as it supports a stronger dollar and reduces the demand for gold as a safe-haven asset. Additionally, the decrease in speculative net positions in gold suggests waning investor interest. However, the underlying inflation pressures from wage growth could provide some support for gold as an inflation hedge, moderating the bearish impact slightly.

• Impact on Equity Futures:
• Equity futures are likely to react positively to the strong payroll numbers and wage growth, as they indicate continued economic expansion and support consumer spending. However, the shift in CFTC speculative positions towards a more bullish stance on equities, particularly the S&P 500, suggests renewed confidence among investors. The decline in rig counts might also support energy stocks, balancing the broader positive sentiment in equity markets.

The robust job market data solidifies the narrative of a resilient U.S. economy, with steady wage growth and job creation providing a favorable environment for continued consumer spending. While this may keep the Federal Reserve on its tightening path, the market’s positive reaction suggests that investors remain confident in the economy's ability to weather higher interest rates. The data points to a constructive outlook for the USD and equities, with gold facing headwinds from a strong dollar and reduced speculative interest.