Before the non-farm data, there is new evidence of the cooling of the US job market, and economic concerns support a substantial rate cut bet. The yield curve of the 2-year/10-year US Treasury bonds, which briefly inverted for the third time in two years. The S&P 500 fell for the third consecutive day, with Broadcom falling more than 4% after hours, Tesla rising nearly 5%, and Nvidia and Chinese concept stocks rising nearly 1%. The yen reached a one-month high, and the offshore renminbi rose by 300 points to break 7.09 yuan. Gold rose briefly by 1%, and oil prices rose more than 2% before falling. US oil fell below $70 for the first time in 15 months over two days.
The labor market data is mixed. The unexpectedly low August 'small non-farm' employment added 0.099 million people, the lowest in three and a half years, and the July data was revised down, showing a sharp slowdown in the labor market. However, the number of initial jobless claims dropped to 0.227 million people at the beginning of each week, and the number of continued unemployment claims also fell to the lowest point in nearly three months.
However, the August ISM services index in the United States has been moderately expanding for two consecutive months. The final value of the Markit services PMI published earlier is the highest in nearly two and a half years, both of which alleviate concerns about an economic hard landing. Daley, a voting member of the Fed and president of the Federal Reserve Bank of San Francisco, said that the Fed needs to lower policy rates because inflation is declining and the economy is slowing down.
After the release of the two employment data, the US bond yields and the US dollar index DXY both fell in the short term and hit daily lows. After the release of the two service PMI data, US bond yields and the US dollar index rose in the short term, then hit daily highs. The market's bet on a significant 50 basis point rate cut by the Fed in September fell from 44% to 41%, and the probability of a 25 basis point rate cut rose to 59%.
The market is focused on the key non-farm data on Friday to further verify the extent of the rate cut. Economists generally expect the new non-farm employment positions for August to be 0.16 million, higher than July's 0.114 million. The unemployment rate may drop slightly to 4.2%.
The major US stock indexes rose in early trading, then fell back during midday trading, with only the Nasdaq successfully turning higher later, but still significantly below the early rise of over 1%. Most stock indexes closed at daily lows later, with the S&P and Russell 2000 index falling for three consecutive days, but China concept stocks defied the trend and rose nearly 1%. In terms of sectors, consumer discretionary stocks led the gains, with Tesla up 4.9%.
The three major U.S. stock indexes only saw the Nasdaq rise: the S&P 500 fell 0.3% to 5503.41 points. The Dow Jones, closely related to the economic cycle, fell 0.54% or 219 points to 40755.75 points. The Nasdaq, which is dominated by technology stocks, rose 0.25% to 17127.66 points. The Nasdaq 100 rose 0.05%. The Nasdaq Technology Market Cap Weighted Index (NDXTMC), which measures the performance of the Nasdaq 100 technology sector stocks, remained nearly flat. The Russell 2000 Index, which is more sensitive to the economic cycle, fell 0.61%. The VIX fear index fell 6.66% to 19.90.
Most U.S. industry ETFs closed lower. The Global X Consumer Discretionary ETF and the Global Airlines ETF rose more than 1%. Meanwhile, the Health Care ETF and the Financial ETF fell more than 1%, and the Regional Banks ETF, the Banks ETF, and the Energy ETF all fell nearly 1%. The Biotech ETF and the Daily Consumer ETF each fell less than 0.5%.
The 11 sectors of the S&P 500 index fell more than rose. The Health Care sector fell 1.39%, the Industrial and Financial sectors fell up to 1.18%, the Materials and Energy sectors fell up to 0.8%, and the Information Technology/Technology sector rose 0.05%, ranking third. The Telecommunications sector rose 0.52%, and the Consumer Discretionary sector rose 1.41%.
Only Microsoft among the 'Tech Seven Sisters' fell. Tesla rose 4.9%, and the company expects to provide Full Self-Driving (FSD) in China and Europe in the first quarter of 2025, subject to regulatory approval. NVIDIA rose 0.94%, Meta rose 0.8%, Amazon rose 2.63%, Google A rose 0.5%, Apple rose 0.69%, and Bank of America expects the upcoming iPhone launch event to boost Apple's stock price, while Microsoft fell 0.12%.
Most chip stocks fell. The Philadelphia Semiconductor Index fell 0.6%; the SOXX industry ETF fell 0.54%; the NVIDIA 2x Long ETF rose 1.71%. Intel fell 0.15%, and Intel is considering selling part of its stake in self-driving software company Mobileye; ON Semiconductor fell 0.6%, ASML Holding ADR fell 1.96%, Applied Materials fell 1.17%, Qualcomm fell 0.47%, KLA Corp fell 2.29%, AMD fell 1.02%, Broadcom fell 0.84%, while ARM Holdings rose 1.77%, and Taiwan Semiconductor ADR rose 1.76%, Micron Technology rose 0.11%.
Most AI concept stocks fell more than rose. C3.ai fell 8.21%, dropping as much as 18% intraday, marking its largest decline since September 2023. The company's subscription revenue for the last quarter fell short of expectations, and it is still unknown when it will become profitable. Super Micro Computer fell 2.09%, BigBear.ai fell 2.88%, Dell fell 1.74%, CrowdStrike fell 1.11%, SoundHound AI, an AI voice company owned by NVIDIA, fell 0.22%, Palantir fell 1.41%, Serve Robotics fell 7.61%, while BullFrog AI rose 5.96%, and Oracle rose 1.32%.
Chinese concept stocks index outperformed the U.S. market. The Nasdaq Golden Dragon China Index rose 0.88%. Among the ETFs, the China Technology Index ETF (CQQQ) rose 0.63%. The China Concept Internet Index ETF (KWEB) fell 0.04%.
Among the popular Chinese concept stocks, NIO rose 14.39%, with Q2 revenue growth of 99% year-on-year. Q3 delivery guidance exceeded market expectations. JPMorgan raised its rating on XPeng ADR from Neutral to Overweight, with a target price raised from $8 to $11.5. Full Truck Alliance rose 8.71%, XPeng rose 4.74%, Li Auto rose 0.48%. Citigroup downgraded the rating of Li Auto to Neutral, stating that there are risks of underperformance in next year's performance. Bilibili rose 2.26%, New Oriental rose 1.98%, Trip.com rose 0.74%, Baidu rose 0.52%, while Alibaba fell 0.05%, Pinduoduo fell 0.08%, Tencent Holdings ADR fell 0.08%, Meituan ADR fell 0.13%, Vipshop fell 0.16%, NetEase fell 1.24%, JD.com fell 1.68%.
In other key stocks: (1) Broadcom's Q3 AI-related revenue fell short of expectations, and Q4 revenue guidelines were disappointing, with a drop of more than 5% after hours. (2) Electronic signature solution provider Docusign's Q2 subscription revenue exceeded expectations and raised its full-year revenue guidance, with a drop of more than 5% in stock price after hours. (3) Robotic process automation software company UiPath's second quarter report and full-year performance guidance exceeded expectations, with a rise of more than 8% in stock price after hours. (4) Applied Digital, which received $0.16 billion financing from Nvidia, rose by about 66%, the largest single-day increase since May 2023.
The expectation of a U.S. economic recession intensifies, and European stock markets fall for the fourth day:
The pan-European Stoxx 600 index fell 0.54% to 512.05 points. The major sectors showed mixed performance, with utilities stocks rising 1.66% and healthcare stocks falling 1.4%. Among the constituents, Tiffany, a subsidiary of LVMH, will open three new stores in China by 2025.
The German stock index fell 0.08%. The French stock index fell 0.92%, the Italian stock index rose 0.01%, the Spanish stock index rose 0.53%, and the British stock index fell 0.34%.
On the "mini non-farm payroll" release day, the 10-year U.S. Treasury yield fell by 2.45 basis points, and the 2/10-year yield curve briefly ended its downward trend for the third time in the past month. The 2-year yield hit a new low of more than one year:
U.S. Treasuries: At the end of the session, the two-year Treasury yield, which is more sensitive to monetary policy, fell by 0.62 basis points to 3.7476%, and plunged and hit a daily low of 3.7106% after the ADP "mini non-farm payroll" release. It rebounded after the release of the ISM non-manufacturing data and hit a daily high of 3.7910%.
The yield on the 10-year benchmark Treasury bond in the United States fell by 2.45 basis points, to 3.7307%, at 20:15 Beijing time following the significant drop in the release of the U.S. ADP employment data. It reached a daily low of 3.7194% at 21:55 near the release of the U.S. ISM non-manufacturing index, and rebounded after the publication of the ISM non-manufacturing data, reaching 3.7722% near the day's high at 17:09. U.S. stocks turned lower again at midday.
European bonds generally fell by about 2 basis points: the yield on the 10-year German bund, the benchmark for the euro area, fell by 1.6 basis points. It significantly declined after the U.S. ADP 'small non-farm' employment data was released and reached a daily low before the release of the ISM non-manufacturing data. The 2-year German bond yield fell by 2.7 basis points. The yield on the 10-year French government bond fell by 2.1 basis points, the Italian 10-year bond yield fell by 2.0 basis points, the Spanish 10-year bond yield fell by 2.1 basis points, and the Greek 10-year government bond yield fell by 1.5 basis points. The 2-year UK bond yield fell by 2.5 basis points, and the yield on the 10-year UK government bond fell by 2.0 basis points.
According to CCTV news, on September 5th local time, the German IFO Economic Research Institute pointed out that after a 0.3% economic contraction last year, Germany's economic growth will stall this year, with the growth expectation for this year reduced by 0.4 percentage points, and the growth expectation for Germany's economy in 2025 reduced by 0.6 percentage points.
"Small non-farm" caused the U.S. Dollar Index (DXY) to drop to a one-week intraday low, the U.S. ISM non-manufacturing data caused the U.S. Dollar Index to briefly rise, and eventually it fell by 0.3% at the close. Non-U.S. currencies rose broadly, with the Japanese Yen rising above 143 in the intraday and continuously rising for three days, and the offshore Renminbi rose 235 points at the close to a nearly 16-month high, breaking through 7.09.
The U.S. dollar: The DXY, which measures the U.S. Dollar against a basket of six major currencies, fell by 0.29% to 101.064 points, dropping significantly to 100.964 points after the U.S. ADP employment data was released at 20:15 Beijing time, rebounded after the release of the U.S. ISM non-manufacturing index, and briefly rose. For most of the day, it was in a downward trend, apart from the volatility brought by the ISM data. It had dropped to 100.514 points on August 27th.
Bloomberg's U.S. Dollar Index fell by 0.19% to 1230.74 points, reaching a daily high of 1233.12 points during the Asia-Pacific lunch break. For the remainder of the day, it was in a fluctuating downward trend, reaching the day's low of 1230.20 points after the U.S. stock midday, and also approaching the bottom of 1221.94 points from August 26th.
Non-US currencies are generally up. The euro rose 0.26% against the US dollar, the British pound rose 0.24% against the US dollar, and the US dollar fell 0.27% against the Swiss franc; among commodity currencies, the Australian dollar rose 0.23% against the US dollar, the New Zealand dollar rose 0.39% against the US dollar, and the US dollar fell 0.02% against the Canadian dollar.
Japanese Yen: The Japanese yen rose 0.21% against the US dollar, reporting an exchange rate of 143.44 yen. Before the US stock market opened, the yen reached a high of 142.852. The US ISM non-manufacturing PMI data caused a temporary decline in the yen and refreshed a low of 144.23 yen.
Offshore renminbi: The offshore renminbi (CNH) rose 235 pips against the US dollar in the late session, reporting an exchange rate of 7.0899 yuan. Overall trading ranged from 7.1144 to 7.0871 yuan during the session. On August 30th, the offshore renminbi rose to 7.0710 yuan.
Cryptocurrencies have mixed performance. The largest cryptocurrency, Bitcoin, fell 3.51% at the end of the session, reporting a price of $56,305. The second-largest cryptocurrency, Ethereum, also fell 3.51% at the end of the session, reporting a price of $2,380. Both reached their lowest level in a month.
Concerns about a global economic recession overshadowed the OPEC+ decision to delay production increase for at least two months, as well as the positive news of US oil inventories falling to a one-year low. Oil prices surged and then retreated to their lowest levels in over 14 months. After rising more than 2.3%, US oil closed down 0.07%, while Brent oil closed down 0.01% after rising more than 2%.
US Oil: WTI October crude oil futures closed down $0.05, or 0.07%, at $69.15 per barrel, reaching a new closing low since June 2023.
Brent Oil: Brent November crude oil futures closed down $0.01, or more than 0.01%, at $72.69 per barrel.
Intraday performance: There are reports that OPEC+ has reached a consensus to postpone the planned increase in oil supply for two months. In addition, the EIA Weekly Petroleum Status Report showed that US crude oil inventories fell by about 6.9 million barrels to a new low since September last year. Influenced by both factors, US and Brent oil prices continued to rise. During the early trading session, US oil rose more than 2.3% and approached the $71 level, while Brent oil rose more than 2% and broke through the $74 level. However, fears of an economic recession triggered a flight to safety, and both oil prices sharply declined. In the afternoon session, when US stocks hit a daily low, US oil fell nearly 0.7% and dropped below the $69 level, while Brent oil fell nearly 0.5% and approached the $72 level.
Natural Gas: US natural gas futures rose by over 5.08% in October, at $2.2540 per million British thermal units. Last week, the natural gas inventory in the US increased by less than market expectations.
Although mid-day ISM services PMI data had narrowed the increase in gold price, the significant decrease in the ADP data on Wednesday and the decrease in the July JOLTS job openings indicated a significant slowdown in the labor market. As a result, the US dollar and the US bond yields softened, boosting the prices of precious metals. The price of gold rose to a near one-week high.
Gold: COMEX December gold futures rose by 0.84% at the close, at $2547.20 per ounce. Throughout the day, the spot gold maintained its upward trend, rising over 1.1% and breaking through the $2520 integer mark during pre-market trading. At the close, spot gold rose by 0.86%, at $2516.76 per ounce.
Silver: COMEX December silver futures rose by 2.14% at the close, at $29.168 per ounce. Throughout the day, the spot silver maintained its upward trend, rising nearly 3.2% and breaking through the $29.10 integer mark during early trading. At the close, spot silver rose by 1.94%, at $28.8229 per ounce.
Analysis suggests that if the non-farm payroll report released on the last Friday of August shows an unemployment rate reaching 4.3% in comparison to July's 4.3%, the highest level since 2021, then with the market strengthening its substantial rate cut bets, gold prices are expected to return to historical highs and have the potential to hit $2700 by year-end.
London industrial base metals experienced mixed movements. The economic barometer 'Dr. Copper' rose by more than 1.47%, closing at $9092 per ton, while London Tin rose by $272, and London Zinc fell by over 2.07%. London Aluminum fell by $18, London Lead fell by $25, and London Nickel fell by $136.
COMEX copper futures rose 1.50%, to $4.1402 per pound.
Editor/Somer