NAS100 Liked the Strong Jobs Report Despite Watered Down Rate Cut Expectations

NAS100 Analysis

Friday brought another hotter than anticipated employment report, as the US added more than 300,000 jobs in March, the biggest increase in nearly a year. At the same time unemployment ticked down to 3.8%. The data further watered down market expectations around rate cuts by the Fed. The previously highly expected June cut now has roughly 50-50 chances according to CME's FedWatch Tool and the highest probability has shifted to 50 bps of cuts (from 75 previously).

It is hard to justify lower rates with robust labor market, strong economy and inflation persistence, so Fed officials have adopted a conservative approach, despite reaffirming the projections that imply three cuts this year. Last week we got a series of hawkish remarks, which continued on Friday after the NFPs report. Although Governor Bowman said it will "eventually" become appropriate to lower rates, she stressed that "we are still not yet at the point" to do that. Adding to the hawkish tone, she warned that policymakers "may need to increase" rates, even though that not her baseline outlook. ^[1]

This dovish repricing around the Fed and risk of a shallower policy path creates headwinds for NAS100, following the recent record highs and led to another losing week. The tech-heavy index breached the EMA200 as we had warned in the last analysis and there is scope for further pressure towards the February lows (17,322).

On the other hand, NAS100 actually rose after Friday's strong jobs data, as market appear to believe that they will boost the economy, reinforcing the soft landing scenario. Along with broader optimism, stemming largely from the AI revolution NAS100 was able to defend the EMA200. This sustains the bullish bias and keeps it on track for new all-time highs towards the 19K mark. Markets now turn to Wednesday's CPI inflation update for the next leg of the move.