Nasdaq 100 Extends Gains After Soft ADP Jobs Report

Also, 10-year T-note, silver, crude oil and Japanese yen futures

1. Nasdaq 100 E-mini futures (/NQ): +0.03% 

2. 10-year T-note futures (/ZN): -0.38% 

3. Silver futures (/SI): +0.40% 

4. Natural gas futures (/NG): +0.28% 

5. Canadian dollar futures (/6C): -0.99% 

For the third day in a row, traders were greeted by weaker U.S. economic data. Today’s flavor is a miss on the May U.S. ADP employment change report, which suggested private payrolls growth is slower than anticipated. However, bad news is seeming good news for both stocks and bonds: The S&P 500 (/ESM4) and Nasdaq 100 (/NQM4) are at their highest levels over the past week; 10s (/ZNM4) are at their May high, while 30s (/ZBM4) have rallied through their May high.  

Technology stocks led U.S. markets higher this morning, with Nasdaq contracts (/NQM4) rising 0.70%. This morning’s jobs report fueled bullish speculation because it suggests the Federal Reserve could start cutting rates later this year. This morning’s ISM services data is also on tap ahead of the nonfarm payrolls report later this week. A hotter-than-expected print from ISM may blunt this morning’s advance if it shows the U.S. services sector reverted back to growth following April’s contraction. Crowdstrike Holdings (CRWD) advanced more than 10% in pre-market trading after beating Wall Street estimates.  

Treasuries continued to advance on hopes the Fed will be able to cut interest rates sooner rather than later following the jobs data this morning. However, the gains have slowed, with the 10-year T-Note contract up about 0.06%. That put the underlying yield at 4.314%, on the verge of breaking the lows from May, which marks a decisive moment for bonds. We still have plenty of event risks ahead for the week, and the Treasury is set to auction 17-week bills today. 

Silver prices rebounded after yesterday’s 3.79% decline—the largest daily percentage loss since April 22. Speculators remained in a largely net long position last week, according to data from the Commodity Futures Trading Commission (CFTC), which suggests the move was driven by profit taking. The April swing high may allow a base to form in the metal as traders reconsolidate their positions, but direction will likely be dictated by this morning’s ISM data. 

Crude oil prices (/CLN4) are on track to break the recent series of declines, up 0.51% this morning, although the commodity is tracking for a 4.5% loss on the week. Data from the Energy Information Administration (EIA) is in focus this morning.  

Yesterday’s private report from the American Petroleum Institute (API) showed a surprise 4 million barrel build in inventory for the week ending May 31. Gasoline stocks also rose following data from GasBuddy that showed some weakness in Memorial Day fuel demand. For now, the narrative for oil remains on the bearish side as worries around demand continue to materialize.  

The Canadian dollar (/6CM4) dropped slightly after the Bank of Canada (BOC) cut its benchmark interest rate by 25 basis points to 4.75%, as expected. Tiff Macklem, BOC Governor, will speak on the bank’s decision this morning, which could further influence the currency. The policy statement revealed that the BOC has likely begun a rate cut cycle instead of today’s decision being a one-off.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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