US open: Stocks rise as weaker data is seen as good news

US futures

Dow futures +0.32% at 31850

S&P futures +0.5% at 4005

Nasdaq futures +0.83% at 12450

In Europe

FTSE -0.94% at 73283

Dax +0.2% at 12960

Euro Stoxx -1.7% at 3670

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Stocks rise as aggressive Fed bets ease

US stocks are pointing higher after weaker than expected ADP payroll figures. The market is sticking with the mantra that weak data is good news and vice versa.

ADP payroll data showed that just 132k, jobs were added in August well below the 288k forecast and roughly in line with July’s 128k. The data suggests that the labour market is starting to cool.

The stock market is working off the basis that weak data could soften the resolve of the Fed the hike rates aggressive. Meanwhile, strong data is bad news for stocks as it paves the way for a more aggressive Federal Reserve.

Still, the mood in the market remains cautious after a strong selloff in the previous session after both US consumer confidence and JOLTS jobs openings beat forecasts, fueling Fed rate hike fears.

The conflicting data shows just how tough it is to draw conclusions about the health of the economy and determine where the Federal Reserve is heading as far as a soft or hard landing is concerned.

Attention is firmly on Friday’s non-farm payroll report for further insight.

Corporate news:

Chewy drops 12% after Q2 sales and full-year guidance disappointed. Customers are reining in spending as inflation rises. EPS was $0.05, ahead of forecasts of a $0.12 loss. Revenue was $2.43 billion, missing estimates of $2.45 billion.

SNAP dropped 8% on reports that two senior management members were moving to Netflix and on reports that the firm will cut 20% of its workforce.

Where next for the NASDAQ?

The Nasdaq has fallen below the multi-week rising channel, dropping below the 50 SMA to a low of 12200. The price has found support at this level, although the RSI supports further downside. Sellers look for a fall below 12200 to extend the bearish trend towards 11500, the July 14 low, and 11100, the 2022 low. Buyers will look for a rise over the 50 sma at 12550 to target 1300, the lower band of the rising channel, the psychological level, which could prove a tough nut to crack.

FX markets – USD rises, GBP drops

The USD is heading higher against its major peers. Stronger than forecast consumer confidence and JOLTS job openings pave the way for more large rate hikes from the Fed.

EUR/USD is falling after eurozone inflation rose to a record high of 9.1% YoY, up from 8.9%. The data piles pressure on the ECB to raise interest rates by a larger 75 basis points. However, as recession fears build, the ECB could be inclined to stick with a 50-basis point hike. Gas flows from Russia along the Nord Stream 1 pipeline turn off today for 3-days.

GBP/USD is falling amid rising concerns over the deepening energy crisis, lifting recession fears. GBP/USD is set for its worst month since 2016 as inflation gathers pace, the UK economy slows, and investors rush to put their money elsewhere. GBP/USD trades down 4.4% this month.

Oil falls a further 3%

Oil prices are heading lower for a second straight day.  Oil has lost around 8% over the past 36 hours and is heading for a third consecutive month of losses, marking the longest losing run in over two years.

As central banks raise interest rates, the prospect of slower growth is hurting the demand outlook. At the same time, economic weakness in China, due to its strict COVID strategy, is also hurting the demand outlook.

On the supply side, reports that the US and Iran have agreed on the nuclear deal revival hit oil prices yesterday, although these reports remain unconfirmed. Should a deal be agreed, Iranian oil sanctions could be lifted, resulting in around 1.3 million barrels a day returning to the market.

Saudi Arabia has floated the idea of cutting oil output. The next OPEC+ meeting is on September 5^th.

EIA stockpile data is due later today.

WTI crude trades -2.9% at $88.96

Brent trades -3% at $95.15

Learn more about trading oil here.

Looking ahead

15:00 US consumer sentiment

15:00 JOLTS job openings