US stocks are consolidating after fresh record highs. Clear signs of weakness in the US labour market and consumer prices rising in line with expectations keep Federal Reserve rate cut bets intact.
Yesterday, the reached a record close, ending above 46,000 for the first time. The and the reached all-time highs as well. All three major averages are up around 1.6% week to date, and the S&P 500 is on track for its best weekly performance since early August.
The gains come as data this week has highlighted weakness in the US labour market. Following last Friday’s soft report and a 911,000 downward revision to payrolls in the year through to March, yesterday jumped to the highest level since 2021.
Weakness in the job market is overshadowing higher inflation. rose to 2.9% marking the fastest level in seven months. However, the data did little to alter expectations for a Fed rate cut next week.
The weakening of the job market appears to be the Fed’s priority, even though inflation was a touch higher. Attention now turns to the University of Michigan surveys, where investors will keep a close eye on .
Corporate News
Adobe (NASDAQ:) will be under the spotlight after raising its annual financial forecasts amid solid demand for its AI-enhanced design software tools.
Super Micro Computer (NASDAQ:), the AI tech firm, announced it will begin volume shipments of its NVIDIA (NASDAQ:) Blackwell ultra solutions to customers worldwide.
Dow Jones Forecast – Technical Analysis
The Dow Jones has been steadily trending higher, trading above its multi-month rising trendline, and is guided northwards by the 20 SMA. The price reached a record high of 46,138 yesterday before easing to 46,020 at the time of writing. Buyers will look to extend the rise above 46,138 to fresh record highs towards 47k. Support is seen at 45,450, the 20 SMA and rising trendline support. Below here, 44,950 comes into focus, the September low.
FX Markets – US Rises, GBP/USD Falls
The is rising modestly but is still set to fall across the week after, amid a weakening in the jobs market, cementing expectations that the Fed will cut rates next week.
The remains unchanged, having gained across the week, following the to keep interest rates at 2% in yesterday’s meeting. I maintain an upbeat view on growth and , which dampens expectations for further cuts in borrowing costs.
The is falling after data showed that the UK economy stagnated in July. data was 0% month on month after rising 0.4% in June. Given sticky inflation and deteriorating consumer confidence, the outlook for growth across the remainder of the year remains weak. Even so, the Bank of England is unlikely to cut rates next week.
Oil Rises for a Fourth Straight Day
are rising after steep losses yesterday as the UK announced a fresh package of sanctions targeting Russian oil. Risk to supply disruption support prices overshadowing concerns over oversupply and weaker US demand, which hit oil prices yesterday.
A monthly report from the International Energy Agency yesterday noted that global oil supply would rise more rapidly than expected this year, due to increased production by OPEC+. However, OPEC+ reported later in the day, leaving its relatively high forecasts for oil demand unchanged this year and next year, broadly maintaining the growth trend.
Meanwhile, geopolitical risks keep oil prices supported after a drone attack on Russia’s northwestern port, one of the largest oil and fuel export terminals, raised concerns over supply.
