Friday's Markets Update (Feb 3, 2023)

04 Feb 2023 by rate3

The record surge in employment (517K, well above the 185K forecast) reported by the Bureau of Labor Statistics took traders by surprise and caused the markets to stumble. NASDAQ (open: 11946, close: 12006) formed a double-top on the hourly chart, indicating a technical weakness, while BTC (open: 23346, close: 23338) continued to range, remaining (formally) within its rising channel.

Job growth was led by gains in the leisure and business services sectors. Employment also increased in government, reflecting the return of workers from a strike in California (+75K). Other key indicators also showed marginal improvements, including the ISM Non-Manufacturing PMI, which increased to 55.2 (above the expected 50.6) and the unemployment rate, which decreased to 3.4 percent (lower than the predicted 3.6) in January.

Now, traders are faced with an important dilemma: either the post-enclosure surge in economic activity, which continues to support the labor market (despite ongoing layoffs in some sectors, such as technology, finance, and real estate), will be offset by a lower consumer demand that is being aggressively suppressed by the Federal Reserve and inflation will continue to decline, or the shortage of labor, rising wages, and a booming stock market will prevent this from happening and lead to the FOMC extending its policy of raising interest rates.

Basically, all things being equal, the future of the markets depends on how a few people interpret a stream of macroeconomic data over the next 2-3 months. This is a guessing game, which does not lead to consistent price trends.