Will Friday's NFP data ease recession concerns on Wall Street?

Will Wall Street withstand recession fears as critical jobs data looms?

US markets rebound from technical support levels despite recession fears, with focus now shifting to crucial employment data as potential catalyst for future direction.

US stock markets bounced on Friday, buoyed by inline inflation data while brushing off a spike in geopolitical tensions following a tense exchange between President Donald Trump and Ukraine President Volodymyr Zelenskyy.

Despite Friday's rebound, the US Tech 100 fell 3.38% last week, recording its worst week since November. Meanwhile, the US 500 ended the week 0.97% lower, while Wall Street rose by 412 points, or 0.95%.

Inflation cools but recession fears intensify

Headline personal consumption expenditures (PCE) inflation for January increased by 2.5% year-on-year (YoY), down from 2.6% prior. Core PCE inflation eased to 2.6% YoY in January from a revised 2.9%, increasing confidence that inflation is moving towards the Federal Reserve's (Fed) target.

While there was positive news on inflation, concerns about an economic slowdown were fuelled by a surprise fall in Personal Consumption Expenditures (PCE) - essentially a measure of consumer spending. PCE fell by 0.2% in January following an upwardly revised 0.8% rise in December.

This was the first decline since March 2023 and the largest decrease in nearly four years. The drop in consumer spending, coupled with a surge in imports, has resulted in the Atlanta Fed's GDPNow estimate for Q1 2025 GDP growth plummeting to -1.5% annualised from a +2.3% growth rate on 19 February.

All eyes on Friday's employment report

This week, attention will focus on Friday's labour market update. Given the current growth scare gripping markets and the likely start of new tariffs this week, there is little room for disappointing jobs data.

Employment report

Date: Saturday, 8 March at 12.30am (AEDT)

January's non-farm payrolls report was mixed. Nonfarm payrolls increased by just 143,000 in January, falling short of the 175,000 expected. The Bureau of Labor Statistics indicated that weather and wildfires "had no discernible effect on national payroll employment, hours, and earnings."

Despite the headline miss, other parts of the report highlighted a strong labour market, with 100,000 of upward revisions over the past two months and an unexpected drop in the unemployment rate to 4.0% from 4.1%.

After rising steadily in the first quarter of 2024, the US unemployment rate has remained between 4.0% and 4.2% for the past nine months, supporting the Fed's recent observation: "The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid."

The expectation for February is for the US economy to add 150,000 jobs while the unemployment rate remains at 4%. The US rates market starts the week pricing in a full 25 basis point (bp) Fed rate cut for June and a cumulative 69 bp of Fed rate cuts for the year.

US unemployment rate chart

US Tech 100 technical analysis

After pushing to a marginal fresh record high on 19 February, the US Tech 100 promptly retreated below 22,000, falling back into its prior eight-week range. This move was then followed by a fall of 1600 points.

As the chart below shows, the exact opposite occurred on Friday night. The US Tech 100 broke below the bottom of its eight-week range before ending the week within its prior range.

Additionally, Friday night's rebound came ahead of a critical region of support, which included the 200-day moving average (MA) at 20,200 and uptrend support from the December 2022 low at 19,850.

Friday night's price action warrants a move to a more neutral bias while watching for one of two things:

• A push above resistance at 22,200 - 22,250 indicates the correction is complete, and the uptrend has resumed
• A sustained move below support at 20,200 - 19,850 opens the way for a deeper pullback towards 18,000

US Tech 100 daily chart

US 500 technical analysis

In last week's update, we noted the false break higher in the US 500 on 19 February and said, "Its retreat leaves the push to the 6147 high exposed as a false break higher and warns that the US 500 has commenced a corrective leg lower. The initial downside target is the mid-January 5923 low before uptrend support at 5860 coming from the October 2023 4103 low."

On Friday night, the US 500 tested uptrend support at 5860, breaking briefly to a low of 5837 before a rebound into the close. At this point, it's impossible to say whether the rebound was a dead cat bounce/short covering rally or marks the end of a correction.

What we do know is that Friday night's bounce occurred from within/near to a significant layer of support, including uptrend support from the October 2023 low, the year-to-date 5773 low, and the 200-day MA at 5720. While the US 500 remains above this key support band, we look for a retest of the 6147 high.

However, if the US 500 saw a sustained break of the aforementioned support band, it would open the way for a decline towards 5400.

US 500 daily chart

• _{Source: TradingView. The figures stated are as of 3 March 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}