Stock Market Today: US Equity Markets Tanks On Growth Concerns After The US NFP Data

Today has been a very important day for equity investors who have been praying the whole week for better news given the selling pressure that we have experienced for the US equity indices throughout this week and the week before. Many in the market were anticipating that even if we received bad news from today's most important economic number, things would still turn out positively, as market players would interpret the bad news as positive. However, this was not how the market price action unfolded, as market players took the economic data at face value and now expressed concern about two key issues: growth concerns and policy mistakes. Equity investors are asking themselves what the US NFP data actually means for US equity and where they should go from here.

The Ugly Data Print: US Jobs Data 

The US Jobs data is considered the mother of all economic numbers among investors and traders, and for the US equity market players, this was the second most important event taking place this week—the first being the Fed’s interest rate decision, which left the interest rates unchanged.

In my opinion, the data released today does not contain any positive aspects, with the exception of the manufacturing sector, which was marginally better than anticipated. This is despite the fact that the ISM manufacturing number indicated that this sector of employment would also print at a lower rate. 

According to the headline, the unemployment rate and the US NFP number are the most significant factors. While the projection was 176K, the US NFP data came in at 114K; the prior figure was 179K. Therefore, the US NFP statistics clearly show a pattern of disintegration. Comparatively to the prediction and previous month, respectively, the unemployment rate was 4.3% instead of 4.1%. Consequently, the present pattern clearly shows a policy mistake. 

Fear surfaces about growth crashing and policy mistakes. 

Equity traders are under the impression that the Federal Reserve has committed yet another policy error, a notion that is not well-received by the public. The media's numerous headlines reveal traders' growing concern over the Fed's latest policy error. In addition, equity traders are of the opinion that the Federal Reserve's policy error has precipitated a growth panic, which could potentially undermine the value of US equity markets. However, the Fed Chairman's remarks could suggest that the 4.3% unemployment rate is still relatively low, and that the average US job creation over the previous several months still exceeds 165K. His assertion that the market has adjusted to a high number in the US Non-Farm Productivity (NFP) could also challenge many expectations. However, this notion would eventually become unsustainable as reality set in.

VIX: Volatility Index Has spiked

The market's volatility has been quiet for a while, but in recent weeks, it appears to be returning. This week, the volatility index, also known as the fear index, reached a level of 27, a level we haven't seen in a long time. It's likely that the trend will persist, particularly if the Fed fails to address growth concerns and fails to act promptly by cutting rates.

So what about US30, Dow Jones 30 now?

The US 30 index, or DJ30 index, has been down for four consecutive months, and now it has officially entered correction territory. A correction territory begins when the index is down by nearly 10% from its recent high, and a bear market territory begins when it falls further by 10%. The US 100 index, also known as the Dow Jones 30 index, consists of 30 names. Currently, less than 2 of these names are in the positive territory. This indicates that more traders continue to believe that the bulls are absent from the market and that the long-term AI trades that previously drove the markets higher are no longer present.

Speaking from a technical perspective, the price has broken below the 50 day SMA (shown in orange), which shows that bears are very much in control of the price. Bulls anticipate the arrival of buying pressure near the 200-day SMA (indicated in yellow); however, if the price persists in its decline, it may move towards the next significant support level, indicated by the green horizontal line.

US 30 chart by XTB