US Non-farm payroll report in focus

Wall Street delivered mixed results yesterday as major indices diverged from recent trends. The Dow Jones surged 400 points, or 0.9%, to 44,49, approaching record territory. Meanwhile, the S&P 500 retreated 6 points, or 0.1%, to 6,198.01, and the Nasdaq declined 167 points, or 0.8%, to 20,202.89, both pulling back from recent highs. Tesla’s 5% decline weighed heavily on both the Nasdaq and S&P 500 after President Trump threatened to eliminate subsidies for companies led by Tesla CEO Elon Musk, intensifying friction between the former allies.

The broader technology sector reflected this weakness, with the NYFANG index of heavily traded tech stocks falling 1.8%. Economic data revealed unexpected strength in the labour market. U.S. job openings jumped to 7.8 million in May, substantially exceeding forecasts of a decline to 7.3 million. Voluntary departures held steady at 3.3 million, typically signalling worker confidence in employment prospects, while layoffs remained essentially unchanged. This resilience prompted a sell-off in U.S. Treasuries, pushing the 2-year yield to near one-week highs.

Manufacturing data presented a mixed picture. The final S&P U.S. Manufacturing PMI climbed to 52.9 in June, well above estimates of 49.3 and marking the sixth consecutive month above the 50.0 expansion threshold. However, the ISM Manufacturing PMI rose only to 49.0, slightly below the forecasted 49.1. Within the ISM report, supplier deliveries and production provided positive momentum, while employment and new orders acted as headwinds.

Market attention now turns to Thursday’s non-farm payrolls report, which could influence expectations for a Federal Reserve rate cut. Money markets currently price in a 21.2% probability of a July rate reduction and anticipate approximately 64 basis points of cuts by yearend. The stronger-than-expected labour data supported the U.S. dollar, which gained against major currencies including the yen and Swiss franc, reflecting expectations that the Federal Reserve will maintain a measured approach to rate cuts.

The Nifty experienced a primarily subdued trading session yesterday, reflecting a muted performance as it remained confined within a small range. After an initial hour of mild volatility, the index saw minimal swings throughout the remainder of the day, ultimately closing with a modest gain of 24 points (0.10%) at 25,541. Despite the quieter session, the Nifty’s pri mary trend remains distinctly bullish, as it continues to hold above all its key moving averages comfortably. Looking ahead, the level of 25,450 is expected to act as crucial short-term support, while 25,670 could offer immediate resistance as the index navigates this consolidation phase. Indian markets are likely to start the day mildly higher in line with positive global cues.

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Source: HDFC Securities Prime Research