Market Estimates Scores Big Misses - Two Days in a Row

The U.S. Labor Department released the job's report numbers for May this morning. Initial estimates for nonfarm payrolls new jobs added in May were 185,000, The actual numbers came in way below expectations at just 138,000. 

Yesterday, the U.S. ADP jobs report released its numbers, which came in way above the initial estimates. Estimates expected about 180,000 jobs to be added in the month of May. The actual numbers released today came in with 253,000 new jobs added.

Yesterday’s discrepancy between the actual numbers and the estimates placed dynamic pressure on the precious metals complex, taking gold prices lower in trading. Gold futures traded to an intraday low of $1263.70, a $12 drawdown on the day, before staging a recovery.

Today’s discrepancy between the actual numbers and the estimates took the precious metals complex to higher ground. As of 4 o’clock Eastern Standard Time, gold futures are trading at $1280, which is a gain of just over ten dollars on the day.

Therefore, initial estimates for both the ADP and US Labor Department’s jobs report were well off the actual numbers, with yesterday’s estimates well below actual numbers, and today’s estimates well above those actual numbers. The net result of these substantial misses was extreme volatility over the last two trading days.

With the next FOMC meeting scheduled to begin midmonth, these numbers are critical to the Fed as they have been on record stating their decisions are data dependent. However even with today’s jobs report coming in well below initial estimates it seems that the Fed is still on track to initiate an interest rate hike when the FOMC meeting is held this month.

According to TheStreet “The chances of a 25-basis-point increase to the federal funds rate when the FOMC meets in June held at 90%, according to CME Group fed funds futures. The Federal Open Market Committee, the decision-making arm of the Fed, is next set to meet June 13-14.”

As I said yesterday recent comments by Fed members have alluded to the “appropriateness” of a rate hike in June, today’s job numbers have probably not changed that sentiment. At the same time with today’s upside move in the precious metals and continuation of a US equities rally which is taken stocks to all-time record highs it seems as though market participants have factored a rate hike into current pricing.

Wishing you as always, good trading,