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U.S. Stocks Fall On Disappointing Payroll Report; Tech Shares Tumble 

U.S. stocks fell, giving up earlier gains, after the payroll report showed lower-than-expected job growth and average hourly earnings rose. 

Tech shares also tumbled, with Apple losing its 3 trillion dollar market cap status. The stock closed down nearly 5%. 

According to a report from the Bureau of Labor Statistics on Friday, the U.S. economy added 187,000 jobs last month, bringing the unemployment rate down to 3.5% from 3.6% in June. The report also showed that average hourly earnings rose 0.4% in July, marking a 4.4% increase over the past 12 months. 

Bond yield also fell, with the 10-year just managing to say above 4% falling 13 basis points. 

Swap traders are projecting a 40% chance of another quarter-point rate increase by the end of this year, with the contracts pricing in about 10 basis points of tightening. By the end of 2024, they project rate cuts totalling more than 125 basis points. 

For the week, the Dow dropped 1.1%, the S&P 500 slipped 2.3% and the Nasdaq tumbled 2.8%. 

Here are the closing levels for Friday, 4th August 2023: 

 Last Change %Change 
Dow Jones 35,065.62 –150.27. –0.43% 
S&P 5004,478.03 –23.86. –0.53% 
Nasdaq Comp13,909.24    –50.47. –0.36% 
U.S. 10Y4.03%   
VIX 17.1 +1.18 +7.41% 

The Price action on Friday may seem a little confusing. 

The Jobs report provided both positive and negative cues for the bulls and the bears.  

Recently, the bulls have not needed a specific excuse to take the market higher. Nevertheless, they took the initiative and sent the market higher with help from falling bond yields.  

It initially appeared that we would erase the losses of the previous 3 days. However, something changed, and the market started to sell off and cancelling out the post jobs report rally.  

There was talk about program or computer driven selling from managed funds. These programs tend to pick up steam if there is downward momentum. The reason it triggered a sell-off is not entirely clear. Nevertheless, it does leave the technical picture slightly bearish, and any further selling could signal a pause in the bull market or worse, the start of a reversal. 

For a reversal to happen, it will take a significant shift, especially with buyers on dips and bulls showing no sign of giving up. 

Keep an eye on the VIX; it has started to move higher, indicating that fear is creeping back into the market. 

Source: CBOE, Bloomberg 

This commentary is written by James Gomes, a seasoned finance industry veteran with extensive experience of over 30 years, including a substantial tenure at a reputable U.S. bank exceeding 20 years.

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