Pre-Market Open: US Stocks Eye NFP Data, Bond Rout Piles Pressure

US stocks have struggled since the beginning of the year, Trump policies causing inflation concerns. Leading to bond rout leaving stock valuations less attractive.

us stocks face pressure from rise in bond yields

The NAS100 is down 0.02% in pre-market trading and the DOW is down 0.01% in anticipation of today’s NFP data.

Bond Markets Predict Higher Inflation

The bond market has been in a sharp selloff since December 2024, peaking at a yield of 4.73% on January 8 and then settling at current levels around 4.70%.

Fixed income investors are concerned about Trump’s policies going into 2025. While the theory says tariffs may import inflation, it still remains to be seen how American entrepreneurs address saving their bottom line.

Also, tariffs on imports are not the sole agenda of the incoming administration. If DOGE works and bureaucracy is reduced I believe we are mor likely to see the economy expand faster than the past 4 years.

Economic expansion may offset slightly higher inflation, and a reduction in government spending may reduce the volume of treasury issuance. Both factors would lead to bonds being bid up and lower yields.

NAS100 Live Chart

NAS100

 

All Eyes on NFP Data

The market today is focused on today’s NFP data where forecasts expect a number of around 160k new jobs. 150k is the number of jobs that most economists consider as indicating an expanding economy.

Usually that’s a positive thing, and the stock market reacts positively. In the current environment, it may mean the Fed sees a risk in higher prices as the economy continues to expand.

I do expect today’s NFP number to create considerable volatility as the markets figure out what the number is likely to lead to.

Attention Turns to Inflation Data Next Week

As the week comes to a close, the market is already turning its attention to CPI and inflation next Wednesday. The week has been particularly lackluster, with the NAS100 losing 0.75% and the DOW 0.25% so far.

Next week’s data for inflation will be closely watched as the Fed is beginning to talk of possible inflation risks. The FOMC minutes released on Wednesday showed that some members discussed the risk of inflation from a hike in import tariffs.

The forecasts are for December CPI are for a small increase from 315.49 to 315.60. While YoY inflation forecasts expect an increase of 0.2% to 2.9% in December.

These may not be large increases but I would imagine the numbers are enough to keep the Fed on hold for the next meeting.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
ABOUT THE AUTHOR See More
Gino Bruno D'Alessio
Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.
Related Articles
Comments
0 0 votes
Article Rating
Subscribe
Notify of
0 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments