Wall Street Ends Week Lower Amid Strong Jobs Report and Fed Rate Concerns | Daily Market Analysis

Key events:

• Japan - GDP (QoQ) (Q1)

Wall Street stocks finished the week slightly lower on Friday following a session of volatile trading. A stronger-than-expected US jobs report indicated a robust economy but raised concerns that the Federal Reserve might delay cutting interest rates longer than investors had hoped.

According to the Labor Department, the US economy added approximately 272,000 jobs in May, significantly surpassing the 185,000 forecast by analysts. Despite the job growth, the unemployment rate edged up to 4%.

In response to the report, the benchmark S&P 500 initially dropped, while US Treasury yields increased as traders reduced their expectations for a rate cut in September. However, the S&P 500 rebounded and briefly touched a new intraday record, as investors took the strong jobs data as a sign of underlying economic strength.

Ultimately, the index closed slightly lower, with utilities, materials, and communication services stocks weighing it down the most. In contrast, the financial and technology sectors showed relative strength.

The Dow Jones Industrial Average declined by 87.18 points, or 0.22%, to 38,798.99. The S&P 500 decreased by 5.97 points, or 0.11%, to 5,346.99, and the Nasdaq Composite dropped 39.99 points, or 0.23%, to 17,133.13.

Gold prices have entered a bearish consolidation phase, fluctuating near their lowest level in over a month, below the $2,300 mark reached after robust US monthly jobs data on Friday. Additionally, the People's Bank of China's decision to pause gold purchases in May, ending an 18-month buying spree, has put further pressure on gold prices. Despite these factors, a cautious market mood offers some support to the safe-haven asset, limiting deeper losses. Traders are hesitant to make aggressive directional bets ahead of key US data releases and central bank events this week, including the latest US consumer inflation figures and the outcome of the two-day FOMC policy meeting on Wednesday, prompting caution before positioning for further losses.

The Australian Dollar remains soft following its decline in the previous session. However, downside risks are tempered by hawkish sentiment surrounding the Reserve Bank of Australia. RBA Governor Michele Bullock indicated that the central bank is prepared to raise interest rates if the CPI does not return to the target range of 1%-3%, according to NCA NewsWire.

The USD/CAD pair is experiencing minor fluctuations, trading just above the mid-1.3700s during the Asian session on Monday. Diverging forces contribute to the subdued price action, but the overall fundamental backdrop seems to favor bullish traders. The US Dollar has climbed to nearly a four-week high, driven by expectations that the Federal Reserve will maintain higher interest rates amid a resilient US economy, bolstered by Friday's strong jobs data. Elevated US Treasury bond yields and a cautious market mood act as tailwinds for the USD and the USD/CAD pair.

Meanwhile, Crude Oil prices have regained some positive traction, building on last week's rebound from a four-month low. OPEC ministers' comments about not increasing supply if prices remain weak have supported the commodity-linked Canadian Dollar capping the USD/CAD pair's gains.

The Japanese Yen has edged lower for the second consecutive trading day on Monday. The USD/JPY pair found support as the US Dollar strengthened following better-than-expected US employment data. Japan released mixed economic data on Monday, which may limit the downside for the Yen. The annualized GDP showed that Japan's economy contracted less than expected in the first quarter, while the quarterly GDP matched flash data by shrinking in Q1.

Japan's 10-year government bond yield moved above 1.01% ahead of the Bank of Japan's policy meeting on Friday. The central bank is expected to maintain its current interest rates, with traders closely monitoring any potential reduction in the bank's monthly bond purchases.