Stock Markets Retreat from High After Weak Employment Data
The S&P 500 led most of the global stock indices lower as investor confidence was weakened by poor employment data out of the US. The monthly Non Farm payrolls figures for March came in well below analyst estimates, and showed a rise of only 88,000 jobs for the month. Previously, markets were expecting a much stronger increase in the neighborhood of 200,000 jobs, so the ultimate result was a major disappointment. Furthermore, the results were less than half of what was seen last month (when the monthly jobs figures showed a rise of 236,000 jobs) and this data was enough of a reason for investors to sell stocks into the end of the week.
The S&P 500 closed below the 1550 level for the week and at this stage it appears as though the downside momentum will continue through to the Asian session this Monday. In other stock moving stories, the Bank of Japan announce plans for a massive new quantitative easing program that is meant to stimulate inflationary pressures and bring increases in consumer price levels. The Nikkei saw its biggest yearly gains on the news as investors start to price in some stabilization in the Eurozone and focus on supportive measures from global central banks. Next week will likely see limited volatility in comparison, as the data calendar is much more limited.
The S&P 500 closed lower after passing its November 2007 highs, to rise into the 1570 region. Prices fell sharply into the latter half of the week, however, and the index is starting to look top heavy with its Friday close below 1550. The next important level to the downside can be found at 1535, which is the 38.2% Fib retracement of the latest rally as well as a level of historical support. A downside break here would be a very bearish event and signal that a near term top is in place in the region of the new all time highs. In order to turn the bearish bias around, we would need to see a break of resistance in the 1557 region.
The FTSE 100 followed the S&P 500 lower into the end of the week, but the eventual drop was more substantial. Support in the 6290 region being taken out very easily. Prices fell to new lows at 6160 before attempting to bounce, but from a technical perspective the damage has been done and more weakness is now expected. The next level of support comes in at 6030, first resistance has now moved down to 6290.
The DAX actually managed to break below downtrend channel support and fall below the 61.8% Fib retracement of its more recent rally. This makes the index highly vulnerable to further declines next week. Next level of support can be found at 7560, first resistance is now seen at 7805.
About Richard Cox
University Teacher in International Trade and Finance. Specialty in technical/fundamental analysis of the commodities and currencies markets.