Wall Street Wrap: US labour conditions eased, Nasdaq back to retest trendline support

Market Recap

Wall Street ended last week in the red, with some unwinding in tech stocks on Friday while the VIX touched its highest level in two weeks. The highlight was the US February job report, which saw cooling US labour conditions as the main takeaway. The US unemployment rate rose to its highest since January 2022 at 3.9% (versus 3.7% consensus), while wages grew at the slowest rate in two years at 0.1% month-on-month. Job additions did come in above expectations (275,000 versus 200,000 consensus), but the strength was stifled by downward revisions in previous readings.

The figures could be what the Federal Reserve (Fed) hopes to see, with a softer labour market supporting an earlier timeline for rate cuts, but market participants seem to take the opportunity for some profit-taking instead. Treasury yields were broadly lower, paving the way for the US dollar to weaken further. Gold prices took comfort in that, extending its gains for the eighth straight trading day to hang around the US$2,186 level.

Look-ahead: US CPI

Ahead, the new week may kick off on a more cautious tone as markets look towards the US consumer price index (CPI) release on Tuesday. Given the hotter-than-expected inflation data in January, traders will be closely watching this month’s CPI to be convinced that previous data is just a one-off. Expectations are for headline inflation to remain steady at 3.1%, while the core aspect may ease to 3.7% from previous 3.9%. If it holds true, this will be the lowest year-on-year core reading since April 2021, which may further bolster earlier rate cut bets.

What to watch: Nasdaq 100

The Nasdaq 100 index is back to flirt with its 18,000 level, leaving a near-term upward trendline on watch for some immediate defending from buyers. Failure for the trendline support to hold may pave the way for the index to retrace further to the 17,390 level, where a 23.6% Fibonacci retracement level stands. For now, its daily relative strength index (RSI) has also edged back to the mid-point level of 50, which buyers have successfully defended since November 2023. Any dip below the mid-point this week could bring about a near-term downward bias, suggesting further cooling in the recent risk rally.