US Equities on the Back Foot

US equities kicked off the week on a cautious note, reacting to a surprising twist in the latest jobs data that injected a dose of uncertainty into the previously optimistic outlook for the economy and the overall sentiment around interest rates. The dollar, which had recently shown signs of softening, regained its strength as the November Non-Farm Payroll (NFP) report revealed a job addition of 199,000, surpassing the anticipated 180,000 on Friday. While expectations for the December meeting remained unchanged, the market recalibrated its expectations for the timing of potential rate cuts in the coming year.

In the previous week, the CME FedWatch Tool suggested a 36% likelihood of two rate cuts by May, a probability that has now decreased to 25%. This shift reflects a tempered anticipation for aggressive rate cuts in the early months of the upcoming year. The dollar index exhibited gains on Friday and sustained its momentum at the start of the new week, demonstrating resilience in the opening session. However, the landscape could undergo a transformation come Wednesday, when the Federal Reserve delivers its final interest rate decision for the year.

Despite a prevailing consensus leaning towards a pause, the market eagerly awaits insights from Jerome Powell’s commentary, recognizing its potential to shape the consensus on the trajectory of interest rates as we approach the dawn of a new year.

Sources: Koyfin, CME Group

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst

Disclaimer: Trive South Africa (Pty) Ltd, Registration number 2005/011130/07, and an Authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act 2002 (FSP No. 27231). Any analysis/data/opinion contained herein are for informational purposes only and should not be considered advice or a recommendation to invest in any security. The content herein was created using proprietary strategies based on parameters that may include price, time, economic events, liquidity, risk, and macro and cyclical analysis. Securities involve a degree of risk and are volatile instruments. Market and economic conditions are subject to sudden change, which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. When trading or investing in securities or alternative products, the value of the product can increase or decrease meaning your investment can increase or decrease in value. Past performance is not an indication of future performance. Trive South Africa (Pty) Ltd, and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered from using or relying on the information contained herein. Please consider the risks involved before you trade or invest.