The U.S economy’s Gross Domestic Product (GDP) has contracted at an annual rate of 4.8% over Q1 2020 according to the "advance" estimate released by the Bureau of Economic Analysis (BEA). The decline in GDP was contributed to “the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.” - BEA
With the coronavirus taking its toll on the U.S economy, the U.S Treasury has announced it would borrow a record $3 Trillion this quarter to try and subsidize economic rescue efforts.
“All the red ink (national debt is near $25T) has some worried about a potential debt crisis and sparked talk about de/inflation, while many see the spending as a temporary lifeline, and see the return to growth despite easy money and massive deficits” - Yoel Minkoff
U.S Jobless claims have seen Americans filing for unemployment benefits at historic levels with claims reaching 3.839 million for the week ending the 25th of April. The number has seen a decrease from the previous weeks number of 4.442 million.
The concerning factor is that since the start of the COVID-19 crises over 30 million people have been affected and the pandemic is spreading across industries. Analyst consensus is that this weeks U.S Jobless claims should com in at 3 million.
Chart - U.S jobless claims
The Non-Manufacturing PMI number is expected to come in higher at 41.8 than the expected at 38.0 but still lower than the previous number of 52.5.
The ISM Non-Manufacturing PMI report is a composite index that reports on business and measures Business Activity, New Orders, Employment and Supplier Deliveries. The index is also used as an indicator to judge how well the economy is performing. A reading above the 50 indicates that the Non-Manufacturing sector is expanding while a reading below 50 indicates a contraction.
Chart - The ISM Non-Manufacturing PMI
The ADP Non-Farm Employment Change data is scheduled later today at 14:15 SAST which is expected to remain in negative territory last seen in the Financial Crises.
The ADP Non-farm Employment Change came in much higher than expected at -20,236K for April 2020.
The U.S. ADP Non-farm Employment Change is an excellent predictor of the Non-Farm Payrolls report as the ADP Non-Farm Employment Change measures the monthly change in non-farm, private employment. The U.S. ADP Non-farm Employment Change is released two days ahead of the NFP jobs number.
Chart - The U.S. ADP Non-farm Employment Change
The number of new Non-Farm jobs is expected to remain in negative territory, with the data expected to come in at -21,375K from the previous month's shocking -701K Non-Farm jobs.
The Average hourly earnings (M/M) number is expected to decrease to 0.3% from the previous months 0.4% and the Average hourly earnings (Y/Y) is expected to increase to 3.3%
This is a crucial figure to watch, and if this number disappoints, it will signal a weak wage inflation outlook in the U.S.
The U.S. Unemployment Rate measures the percentage of the total workforce that is unemployed and actively seeking employment during the previous month. The U.S. Unemployment Rate is expected to show a significant increase from the previous reading to 16%.
The Non-Farm Payrolls report (NFP) is treated as an economic indicator for people employed during the previous month, and the number being released will have a direct impact on the markets. In the United States, consumer spending accounts for most of the economic activity, and the Non-Farm Payrolls report represents 80% of the U.S. workforce. Farmers are excluded from the employment figures due to the seasonality in farm jobs.
Volatility has slowed down for the time being but is still present in the U.S Markets as the earnings season progresses. The “dead cat bounce” price pattern did not play out as anticipated but instead the price action started to rally and form higher highs and higher lows. The price action started to form a price pattern which resembled a “cup and handle”.
Technical points to look out for on the Daily Wall Street 30:
Chart - WallStreet30 Daily
Scaling into a 4H chart of the Wall Street 30 we might see signals earlier and clearer which might provide better entries on this time frame. Here we can see why it is mentioned above to watch the 61.8 Fibonacci level.
Technical points to look out for on the 4H Wall Street 30:
Chart - WallStreet30 4H
Take note: that the outlook and levels might change as this outlook is released before NFP and before the current days (Wednesday 6th of May 2020) U.S Market open.
Non-Farm Payrolls are usually reported on the first Friday of the month, whereby the number of additional jobs added from the previous month is released. The US Non-Farm Payroll number will be released locally on Friday the 8 May 2020 at 14:30 SAST.
Sources – Bloomberg, Koyfin, Investing.com, MetaTrader5
Disclaimer:
Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. GT247.com does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information which we receive from third party data providers. You must rely solely upon your own judgment in all aspects of your trading decisions and all trades are made at your own risk. GT247.com and any of its employees will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice. Past performance is not necessarily an indication of future performance. The value of a financial product is not guaranteed. The value of a financial product can go down or up due to various market factors. The graphs are for illustrative purposes only.