Large NFP miss and Oil surge to $90 – A Stagflation cocktail ahead of weekend risk

This morning is sending a nasty look for Markets, as Oil continues to explode higher amid Middle East tensions. At the same time, US labor data keeps showing volatility, this time to the downside.

It is a dark day for risk assets, and the fundamentals aren’t going to help – particularly with a miss in Retail Sales rubbing salt in the wound, it seems that prior bounces in US data could have been a seasonal effect of Holidays/New Year hiring and consumption. We could now be facing a hangover.

Non-Farm Payrolls just released at –92K vs +56K expected, a significant (-148K) miss!

Such a reversal in the data can’t fail to raise questions about actual job displacement from new AI technologies and whether the Federal Reserve is really getting behind the curve.

The issue for the Central Bank is that inflation is certainly bouncing higher despite lower Retail Sales – so combine a weaker jobs Market, consumption, and elevated inflation, and conclusions about stagflation could be reached quickly – and with decent reasoning, too!

With Energy prices shooting higher throughout the week, it is certain that inflation expectations are not going to ease anytime soon – the only thing that could soothe them at this point is an actual pricing of slower consumption ahead, but that wouldn’t fare well for the US economy.

Goods-producing, Private Education, and Services took the largest hit, with gains only seen in Financials and Wholesale Trades. You can get access to the Non-Farm Payrolls report for February right here.

We will provide a quick outlook on the Market before diving into WTI (US) Oil Charts to get ready for what could be another volatile weekend.

Discover:

• Markets Today: Rate cut hopes wither as Nikkei and Kospi suffer steep weekly losses. NFP data up next
• Chart alert: Gold (XAU/USD) is down 3% for the week, but bulls may make a comeback
• The Canadian Dollar loves conflict – Has the CAD reached a long-term bottom?

There goes risk-appetite, as a close to 10% rise in daily WTI prices will keep raising inflation expectations and that tends to coincide with major repricings in Equity markets

An in-depth Stock Market coming at the top of the morning.

Bitcoin and Cryptocurrencies are not sustaining the dampening Market mood.

Even Bonds, which could have thought to rebound in such a miss in Non-Farm Payrolls, are actually met with high pressure from the rise in Oil (and rising Inflation Expectations).

Only Gold and Silver are rebounding, albeit a timid rebound for now – A Double bottom in Gold will be helping its prospects on the intraday.

Nonetheless, a larger picture double top could still have its effect, so Bulls will have to show real strength, volume and conviction!

The last time we saw the $90 handle in WTI was in late 2023 – A scary picture, particularly considering that Oil was trading at $55 just about two months ago!!

The Commodity has now risen 30% since the beginning of the week and despite some slight easing, the squeeze doesn’t seem to be stalling.

A more detailed analysis for Oil is coming up in the afternoon. For now, keep track on if the action remains above $86.

• If it closes here, pressure will remain high.
• Correcting below should point to a slight correction ($80 would be the next step).

Keep a close eye on sentiment and Middle East news.

Safe Trades!

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