Crude Oil

Markets Post FOMC and Pre NFP

By Mark O’Brien, Senior Broker

General: 

In a lead-in to today’s FOMC rate decision, the Labor Department reported that U.S. labor costs increased moderately in the second quarter as private sector wages grew at the slowest pace in 3-1/2 years.  The report from the Labor Department this morning followed data last week showing inflation subsided considerably last quarter, with sub-3% readings in several measures.  Traders – and maybe Fed policymakers – viewed the reports as more evidence inflation is earnestly on a downward trend and could ready the Fed to bring down borrowing costs.

It wasn’t expected that Federal Reserve policymakers would adjust their benchmark interest rate at the conclusion of their two-day meeting today.  The economy remains resilient, but the fear of recession has not been completely overcome.  With that said, this meeting may be the last time the FOMC leaves rates on hold.

The markets now see a 90% chance of a twenty-five basis point rate cut in September, according to the CME FedWatch Tool.

While the U.S. central bank is inching toward a rate cut cycle, the Bank of Japan is moving in the opposite direction. Overnight, the BOJ raised its key short-term interest rate to 0.25%, the highest level since December 2008.  It also announced plans to cut its bond purchases in half until March 2026 to ensure market stability.  This comes after years of Japan’s negative interest rate policy that ended back in March.

Indexes:     

As of this typing, the September E-mini S&P 500 stock index futures contract climbed ±110 points (a ±$5,500 per contract move) / ±2%.  The September E-mini Nasdaq jumped over 600 points (a $12,000 per contract move) / ±3%.

Metals:  

Dec gold futures prices traded up ±$35.00 / oz. to ±2,487 / oz., its sixth highest close and within ±$20 of its all-time high on growing optimism the U.S. Federal Reserve will conduct an interest-rate cut in September.

General, P.S.: 

The next big scheduled event: this Friday’s monthly Non-farm payrolls report from the U.S. Labor Department. It’s widely considered one of the most important and influential measures of the U.S. economy.  To convey its findings, the Labor Dept.’s Bureau of Labor Statistics surveys about 141,000 businesses and government agencies, representing approximately 486,000 individual work sites (the report excludes farm workers, private and domestic household employees and non-profit organization employees).  The report also includes other detailed employment data including the overall unemployment rate – as a percentage of the total labor force that is unemployed but actively seeking work – wages, wage growth and average workday hours.  The report is released at 7:30 A.M., Central Time.  Economists polled expect non-farm payrolls to have increased by approximately 178,000 in July, just below June’s 206,000 gain and in line with the recent three-month average of 177,000.

Daily Levels for August 1st, 2024

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