The markets are holding steady ahead of this morning’s U.S. Jobs report. Here is recap of Thursday’s action leading up to today’s report.
U.S. stock markets plunged sharply lower in a volatile trading session on Thursday as investors bailed out of equities on concerns about the economy. If this had been a normal trading day, the markets would have been under pressure into the close but short-covering ahead of Friday’s jobs report helped to limit losses. Worries about joblessness, manufacturing and housing fueled today’s break as investors appear to be pricing in the possibility of a double-dip recession.
On Thursday, a government report citing weaker than expected initial claims triggered the initial weakness in the markets. Further downside pressure was attributed to declines in pending home sales and the Institute for Supply Management manufacturing index.
Following May’s disappointing 41,000 gain in private jobs, and current signs that the economy is losing momentum because of cuts in government stimulus, lower consumer spending and a decline in consumer confidence, investors are bracing for what may be an ugly June Non-Farm Payrolls Report. How much of this gloomy news is already in the market will be known by this time tomorrow. Pre-report guesses are for Non-Farm payrolls to show a loss of about 130,000 jobs. Private sector payrolls are expected to rise by 115,000.
August Gold took a plunge on Thursday as a combination of fundamental and technical factors sent investors scurrying for the exits. Fundamentally, the first sign of trouble this morning was a weak Dollar and a weak gold market. This sent a signal that the normal Dollar/gold relationship was not working. A sharp rise in the Euro helped pressure the Dollar but it also caused a massive liquidation in the Euro/gold spread. Speculators had been buying gold priced in Euros throughout the currency crisis. Now that the Euro has stabilized and is rallying, speculators felt the need to liquidate their positions.
Technically, the gold market plunged when the August contract took out a daily chart swing bottom at $1225.20 while also piercing an uptrending Gann angle and a 61.8% retracement level at $1224.20. The charts indicate there is plenty of room to the downside with $1158.20 a likely target over the near-term.
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