S&P 500 Climbs on Strong Nonfarm Payrolls, APAC to Open Mixed

S&P 500, NIKKEI 225, ASX 200 WEEKLY OUTLOOK:

• Dow Jones, S&P 500 and Nasdaq 100 indexes closed –0.06%, +0.52% and +1.33% respectively
• US nonfarm payrolls beat estimations by a wide margin, underscoring strong labor market conditions
• Asia-Pacific markets look set to follow a positive US lead. Mainland China markets reopen after holiday

US Earnings, Nonfarm Payrolls, Inflation, USD – Asia-Pacific Week-Ahead:

Wall Street stocks ended a volatile week with a positive tone, with Amazon’s stellar Q4 results revitalizing market confidence after Facebook’s earnings miss. Amazon’s share price advanced 13.5% on Friday, pushing its market cap to over $1.6 trillion. The FAANG companies have reported divergent results in recent weeks, stoking market volatility. Large price swings suggest that investors are getting increasingly sensitive to signs of waning growth momentum amid rising wage pressures and the gradual exit from the Covid-19 pandemic. This may affect consumers’ lifestyle and appetite for digital services, even though demand for smartphone devices, goods and electric vehicle remains robust.

The monthly increase in US nonfarm payrolls jumped to 467k in January, beating a 150k expectation by a wide margin. Readings in the previous two months have also been revised up to 510k and 647k from 199k and 249k respectively. Much higher-than-expected job gains underscore strong labor market conditions against the backdrop of surging Omicron cases. This also suggests that the economy is weathering the pandemic’s impact well, and may be strong enough to withstand a few interest rate hikes this year.

Another bright spot is wage gains, which came in at 0.7% MoM, or 5.7% YoY. Strong wage gains and rising commodity prices may feed into inflationary pressures, spurring a quicker pace of monetary tightening. As a result, the DXY US Dollar Index snapped a five-day losing streak and closed higher. Yields on the10-year US Treasury topped 1.9% for the first time since January 2020, returning to the pre-pandemic levels.

US Nonfarm Payrolls and Unemployment Rate – Past 12 Months

Source: Bloomberg, DailyFX

So far in the earnings season, more than 50% of the S&P 500 companies have announced results. Among those, around 80% have beaten market expectations with an average earnings surprise of 6.6%. The percentage of companies that delivered positive surprises and their magnitude are slightly lower than in the previous quarter, however. The FAANGcompanies and Tesla have painted an uneven earnings picture, underscoring a challenging environment for tech giants as they attempt to maintain growth momentum during the post-Covid era. Results from Pfizer and Twitter will be in focus this week. Click here for a preview.

Major US Corporate Earnings This Week

Source: Bloomberg, DailyFX

APAC markets look set to kick off the week with a mixed tone as futures in Japan, Australia, Malaysia, India trade lower at the open. Those in Hong Kong, South Korea, Taiwan, Singapore, Thailand and Indonesia are in the green however. Mainland Chinese bourses are reopening after a weeklong CNY holiday. Chinese investors will digest a strong US nonfarm payrolls report and intensified bets on Fed rate hikes against the backdrop of mixed earnings.

For the week ahead, Thursday’s US core CPI readingdominates the economic docket alongside Friday’s University of Michigan consumer sentiment index. China Caixin PMI and Australia’s retail sales figures will also be monitored on Monday. Find out more from the DailyFX calendar.

Looking back to Friday’s close, 5 out of 11 S&P 500 sectors ended higher, with 42.8% of the index’s constituents closing in the green. Consumer discretionary (+3.74%), financials (+1.66%) and energy (+1.58%) were among the best performers, whereas materials (-1.72%) trailed behind.

S&P 500 Sector Performance 04-02-2022

Source: Bloomberg, DailyFX

S&P 500 Index Technical Analysis

The S&P 500 index may have entered a meaningful correction after breaching below an “Ascending Channel” as highlighted on the chart below. Prices tested an immediate support level of 4,200 and have since rebounded. The rebound was interrupted last week following the release of Facebook results, showing that the index may show hesitance about where to go next. The MACD indicator formed a bullish crossover beneath the neutral midpoint, suggesting that a technical rebound maybe underway but the overall momentum remains weak.

S&P 500 Index – Daily Chart

Chart created with TradingView

Nikkei 225 Technical Analysis:

The Nikkei 225 index breached below a “Symmetrical Triangle” pattern and thus opened the door for further downside potential. Prices have rebounded last week, but the overall trend remains bearish-biased. The lower trendline of the “Symmetrical Triangle” has now become an immediate resistance. The MACD indicator formed a bullish crossover, suggesting that a technical rebound may be underway.

Nikkei 225 Index – Daily Chart

Chart created with TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index breached below the floor of a range-bound zone between 7,200 to 7,500, exposing the next support level of 6,920. The floor of the range may now be viewed as immediate resistance level. The overall trend has now become bearish-biased after the formation of a lower low. The MACD indicator formed a bullish crossover beneath the neutral midpoint, suggesting that a technical rebound is underway, but overall momentum remains weak.

ASX 200 Index – Daily Chart

Chart created with TradingView

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter