Markets digest a disappointing NFP

HIGHLIGHTS:

• Markets continue to digest an NFP release that failed to meet high expectations

• Despite the US unemployment rate dropping and participation rate rising, the relief rally in the stock market might not last

• Fed Chair Powell´s hawkish turn catches investors by surprise, and the Fed switching its focus from the employment market to inflation could be big

• The Fed isnt the only central bank that has its focus on inflation, with the Bank of Canada hinting at a more aggressive rate hiking phase

Markets digesting Friday's jobs report

Friday´s NFP figure was disappointing and arrived well below expectations (210k vs 531k expected). Nevertheless, the unemployment rate dropped to 4.2 % and the participation rate is rising. The relief rally in the stock market might not last as traders realize that the jobs report as a whole was pretty strong and that it could pave the way for a faster unwinding of the Federal Reserve´s stimulus measures.

Further Dollar strength appears likely towards year-end, while equities could stay under pressure amid a combination of tapering fears and uncertainty surrounding the pandemic.

USTECH in particular could struggle as investors are heading for the exit door ahead of the year-end. Tech stocks were investors´ favorites in 2021, but the prospect of a hawkish Fed and concerns about the omicron variant – which has investors rushing into buying safe havens – will keep the pressure intact in the near-term.

The daily close below 15,725 support on Friday suggests the correction might extend to 15,288 points, after which USTECH bears would start to eye the important support zone between 14.381 and 14.602 points.