The Dow Jones closed lower by 366 points/1.1% on Thursday (06/07/23), leading the weakness between the Nasdaq and the S&P 500, as economic data showing the job market continues to run hot sparked a flurry of bets on further Federal Reserve rate hikes; sending Treasury yields surging higher ahead of the monthly jobs report due Friday. US ADP Nonfarm Employment Change turned out to record 497 thousand new jobs in the private sector in June, far above economists’ estimates of 228 thousand and last month’s 267 thousand. The data gave a more significant negative sentiment to the market because the actual Initial Jobless Claims also turned out to be slightly higher than expected, and the US JOLTS Job Openings data for May was also below expectations. Stoking market fears that the Fed is likely to follow its guidance for two more hikes. Adding to the signs of economic strength, service sector activity data as reflected in the US ISM Non-Manufacturing PMI expanded further, supported by rising demand; although prices paid both by consumers as well as at the producer level (as an indicator of Inflation), fell more than the 3-year low. In response to the economic data announcement above, Treasury yields jumped in anticipation of more Fed tightening ahead, with the 2-year yield and 10-year yield topping 5% and 4%, respectively. Currently, market participants priced in a 93% chance that the US central bank will raise interest rates this July, as quoted from’s Fed Rate Monitor Tool. From continental Europe, German Factory Orders in May also jumped significantly above estimates, growing 6.4% (higher than the consensus of 1.2%, and April’s 0.2%). Unfortunately, business activity elsewhere was still sluggish, with UK Construction PMI in June falling into contractionary territory and Retail Sales (May) for Eurozone unable to recover from the previous month’s negative growth. In terms of commodities, Energy sector stocks led the overall market weakness even though crude oil prices rebounded from their low as weekly data showed US oil inventories fell by 1508 million barrels, greater than the forecast of 983 thousand. Consumer sector stocks came under pressure as fears of weakening demand due to mortgage rates skyrocketing to their highest level this year. Meanwhile, although the Technology sector struggled to counteract the effects of rising bond yields making it more expensive for growth stocks, Microsoft managed to post a 1% gain helped by optimism around the AI space.

The JCI rejoiced, continuing its bullish movement on Thursday, as it managed to save 38.35 points to 6757.33, re-entering the critical Resistance area in the last 1.5 months. Considering the negative sentiment rolling in the regional market, there is a possibility that JCI’s further upside potential could be hampered, as investors/traders tend to be more cautious at the end of the week. NHKSI RESEARCH suggests to Wait & See for a breakout of JCI’s strong bullish strength, before deciding to Average Up further.

Download full report HERE.