- The Dow Jones tested the low side of the 45,000 handle on Thursday.
- US Initial Jobless Claims ticked higher on a weekly basis.
- Investors are shuffling their feet ahead of this week’s NFP jobs report.
The Dow Jones Industrial Average (DJIA) fell back slightly on Thursday, easing down around 150 points and keeping price action in a tense standoff with the 45,000 major price handle. Markets are coiling ahead of Friday’s upcoming Nonfarm Payrolls (NFP) report, and investors are growing uneasy after a batch of missed expectations in preview labor figures.
Overall market sentiment remains firmly bullish, keeping equities close to record highs. Clear signs of an economic slowdown remain elusive, preventing traders from pivoting firmly into a risk-off stance. Still, a murky policy outlook for 2025 has bulls second-guessing sky-high valuations. Incoming President Donald Trump favors a policy stance that could reignite inflation pressures, sacrifice economic stability, and send government budgets spiraling. However, that’s a long way off, and markets are holding onto hopes that Trump’s pro-market stance and distaste for regulation will help offset downside pressures on business earnings.
Initial Jobless Claims for the week ended November 29 rose to a six-week high of 224K, missing the expected print of 215K and stepping above the previous week’s revised 215K. Challenger Job Cuts in November also rose to 57.727K, but the batch of mid-tier labor data pales in comparison to Friday’s upcoming NFP print. Investors are expecting November’s NFP net jobs additions to rebound to 200K after the previous month’s stumble to 12K. October’s shockingly low print was attributed to layoffs from hurricanes and labor strikes, and investors are hoping for a healthy rebound in job gains.
Dow Jones news
Most of the Dow Jones equity board is rising on Thursday, with equities overall bidding into positive territory, however key losses in overweighted securities are dragging the Dow Jones into the low side for the day. Unitedhealth Group (UNH) sank 4% to $586 per share after the CEO of Unitedhealth’s insurance unit was assassinated in New York this week. Salesforce (CRM) also eased down 2%, falling to $360 per share as the heavily overvalued stock sheds some weight. CRM has been swept up along with the broader AI craze gripping tech stocks and single-handedly driving the market’s equities rally, but some investors are beginning to caution that they would like to see some evidence of CRM’s revenue margins expand as a result of AI incorporation in the company’s platform.
Dow Jones price forecast
The Dow Jones is grinding into a near-term sideways pattern as daily candlesticks struggle to find momentum in either direction. The major equity index is grappling with the 45,000 handle, but a meaningful downside pullback has yet to materialize after the DJIA found fresh record highs last week.
Traders looking to catch another leg higher will be looking for a fresh retracement to the 50-day Exponential Moving Average (EMA) rising through 43,300. A deep pullback to the last swing low near the 42,000 key level is unlikely to materialize, but represents a significant discount compared to recent price action, and could spark a steep rebound.
Dow Jones daily chart
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
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