US wage data the focus into the weekend
This afternoon sees the release of the latest employment figures from the US in what is a eagerly followed data point for traders. The monthly non-farm payrolls report always features prominently on trader's radars but its importance has grown even more in the last couple of months since the major fallout from February’s release. Headline jobs growth is expected to remain robust with 188k jobs predicted to have been added in the month of March, but markets will more likely focus on the wage figures which are expected to rise to 2.7% in year-on-year terms
Major test for stock market recovery
Stocks have enjoyed a strong recovery in the past 48 hours after the initial knee-jerk reaction to the latest Chinese tariffs has worn off but they are not out of the woods just yet. This afternoon’s jobs data has the potential to scupper the recent rally, with the large declines seen back in February coming shortly the NFP release. On Friday the 2nd February the announcement of a larger than expected rise in US wage growth to 2.9% Y/Y - the highest level since May 2009 - spooked the markets and saw large drops in stock indices both later that day and at the start of the following week. The large rise in wages was subsequently revised lower to 2.8% and a print equal to this or higher today would ask serious questions of stock market strength.
Wages set to rise once more; how will stocks react?
What has been a good week thus far for equity bulls could still be scuppered should there be a sizeable adverse reaction to today’s data and tonight’s closing levels will quite possibly be the most important in several weeks. Should the market react positively to this afternoon’s data then the rally could well gain traction and longs will be far more positive going forward. However, should the market come back under selling pressure and undo the good work seen in the past couple of days then it may be a nervy weekend for bulls who will be fearful of a retest of the recent lows and the possibility of another push lower.
Arguably the most positive outcome would be a rise in wages accompanied by a higher close in stocks, which would suggest that the market reaction to the February release was something of an outlier and not the norm.