Dow Jones Forecast: DJIA rises after a Goldilocks NFP report

US futures

Dow futures +0.04% at 38798

S&P futures +0.43% at 5170

Nasdaq futures +0.2% at 18328

In Europe

FTSE -0.43% at 7663

Dax -0.11% at 17845

• Stocks extend gains after the NFP report
• strong jobs growth & cooling wage growth keep a June rate cut in focus
• GBP/USD rises to a 7 month high
• Oil holds steady but is set for a weekly loss

More record highs after the Goldilocks NFP

U.S. stocks are pointing to a stronger start, with the S&P500 rising to a fresh record high after a Goldilocks non-farm payroll report, which keeps bets on track for a June rate cut.

The US added 275k jibs in February, down from 353k in January but ahead of the 200k forecast. Yet, while job creation was stronger, the unemployment rate and wage growth showed signs of a cooling labour market.

Unemployment unexpectedly ticked higher to 3.9%, up from 3.7%, and wage growth cooled to just 0.1%, down from 0.6% and well below forecasts of 0.3%.

The data comes after the S&P 500 closed at a record high on Thursday after Federal Reserve chair Jerome Powell said the central bank was not far from cutting interest rates should inflation continue to trend lower. With wage growth pressures easing, inflation is more likely to continue its easing trajectory.

Inflation data is due out next week, and investors will be watching closely to see whether it will provide further evidence that the Federal Reserve may be able to cut interest rates in June.

Corporate news

Costco is set to open 4% lower after the big box retailer posted Q2 revenue that missed expectations. A more cost-conscious consumer hurt demand for higher-priced items.

Broadcom fell 1.8% after the semiconductor group’s full-year forecasts disappointed, even though they expect $10 billion in revenue from AI-related chips this year.

DocuSign is set to open over 8% higher after the group unveiled robust current quarter guidance and better-than-expected Q4 results.

Dow Jones forecast – technical analysis.

After hitting an all-time high of 39284 at the end of February, the price has been edging lower, falling below its multi-month rising trendline, but it is finding support at 38450, the weekly low. Sellers will look for a break below here to extend losses towards 38000, the February low. Buyers will look for a rise above 39240 to create a higher high and a new record level.

FX markets – USD falls, GBP/USD rises

The US dollar is falling after the US non-farm payroll report, where the rise in unemployment and slower wage growth supports the view that the Fed will cut rates in June.

EUR/USD is falling but is still set to book strong gains across the week as investors continue weighing up the ECB rate decision yesterday. The ECB left rates on hold and President Christine Lagarde signaled to a possible June cut. Today, data confirmed that the eurozone economy avoided a recession at the end of 2023 and, according to the ECB’s new forecasts will grow 0.6% this year. The pair is set to rise across the week on a softer USD.

GBP/USD is rising and trades at its highest level since July last year as the pound benefits from the likelihood that the Bank of England will cut rates after the Federal Reserve and the ECB. This week, it's been a quiet week for UK economic data. Attention is turning to labour market figures on Tuesday, which could provide further clarity over wage growth and inflationary pressures. The UK labour market has remained relatively resilient despite interest rates rising to a 15-year high.

Oil holds steady but looks to a weekly loss

Oil prices remained steady for a second straight day as investors digested signals from the Federal Reserve and ECB regarding the timing of possible interest rate cuts.

Lower interest rates could help lift the oil demand outlook by boosting economic growth. This week, the ECB signaled towards a potential June rate cut, and Federal Reserve chair Jerome Powell said the central bank was not far from loosening monetary policy.

However, the upside is being limited by well-supplied markets, according to the IEA. Concerns over whether China will be able to achieve the 5% growth that it is targeting this year without a massive stimulus boost, which Beijing is so far proving unwilling to provide.