Looming Jobs Report May Lead To Choppy Trading On Wall Street

The major U.S. index futures are pointing to a roughly flat open on Thursday, with stocks likely to show a lack of direction following the mixed performance seen in the previous session.

Traders may be reluctant to make significant moves ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Economists currently expect employment to jump by 978,000 jobs in April after surging up by 916,000 jobs in May. The unemployment rate is also expected to dip to 5.8 percent from 6.0 percent.

With the monthly jobs report looming, the Labor Department released a report this morning showing first-time claims for U.S. unemployment benefits fell by much more than expected in the week ended May 1st.

The bigger than expected decrease once again dragged jobless claims down their lowest level since the early days of the coronavirus pandemic.

Uncertainty about the near-term outlook for the markets may also keep some traders on the sidelines after yesterday saw the Dow reach a new record closing high while the Nasdaq extended a recent pullback

Stocks fluctuated over the course of the trading day on Wednesday before eventually ending the session mixed. The major averages finished the day on opposite sides of the unchanged line.

While the Nasdaq fell 51.08 points or 0.4 percent to 13,582.43, the Dow rose 97.31 points or 0.3 percent to 34,230.34 and the S&P 500 inched up 2.93 points or 0.1 percent to 4,167.59.

The continued upward move by the Dow came after the blue chip index bucked the downtrend seen during trading on Tuesday to close modestly higher.

Strong gains by Dow Inc. (DOW), Chevron (CVX) and Merck (MRK) helped lift the Dow to a new record closing high.

Overall buying interest was somewhat subdued, however, as the latest U.S. economic pointed to continued strength in the economy but came in below economist estimates.

Before the start of trading, payroll processor ADP released a report showing private sector job growth accelerated in the month of April but still came in below expectations.

ADP said private sector employment spiked by 742,000 jobs in April after surging by an upwardly revised 565,000 jobs in March.

However, economists had expected private sector employment to soar by 800,000 jobs compared to the jump of 517,000 jobs originally reported for the previous month.

The Institute for Supply Management also released a report showing an unexpected slowdown in the pace of growth in U.S. service sector activity in the month of April.

The ISM said its services PMI edged down to 62.7 in April after jumping to an all-time high of 63.7 in March. A reading above 50 still indicates growth in the service sector, but economists had expected the index to inch up to 64.3.

The unexpected drop by the services index comes after the ISM released a separate report earlier this week showing an unexpected slowdown in the pace of growth in U.S. manufacturing activity.

Energy stocks showed a substantial move to the upside on the day despite a modest decrease by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index skyrocketed by 5.4 percent and the NYSE Arca Oil Index soared by 3.5 percent.

Considerable strength was also visible among steel stocks, as reflected by the 1.7 percent gain posted by the NYSE Arca Steel Index. The index ended the session at its best closing level in nearly ten years.

Brokerage, natural gas and airline stocks also saw significant strength, while interest rate-sensitive utilities and commercial real estate stocks showed notable moves to the downside.

Commodity, Currency Markets

Crude oil futures are falling $0.53 to $65.10 a barrel after edging down $0.06 to $65.63 a barrel on Wednesday. Meanwhile, after climbing $8.30 to $1,784.30 an ounce in the previous session, gold futures are rising $7.70 to $1,792 an ounce.

On the currency front, the U.S. dollar is trading at 109.26 yen versus the 109.30 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.2053 compared to yesterday’s $1.2005.

Asia

Asian stocks turned in a mixed performance on Thursday amid cautious optimism around the economic reopening in the developed world. Meanwhile, comments from U.S. Treasury Secretary Janet Yellen and several Fed officials helped ease investor concerns about rising inflation.

Chinese shares ended slightly lower as markets resumed trading for the first time since last week. The benchmark Shanghai Composite Index slipped 5.57 points, or 0.2 percent, to 3,441.28, while Hong Kong’s Hang Seng Index rose 219.48 points, or 0.8 percent, to 28,637.46.

Japanese shares posted strong gains to mark their biggest percentage gain in two weeks as traders returned to their desks after a five-day holiday. Tokyo Governor Yuriko Koike said on Thursday an extended state of emergency was needed to contain infections that are straining the capital’s medical system.

The Nikkei 225 Index jumped 518.74 points, or 1.8 percent, to 29,331.37, led by cyclical stocks. The broader Topix settled 1.5 percent higher at 1,927.40.

Steel makers JFE Holdings and Nippon Steel surged around 8 percent, while tech shares tracked the Nasdaq Composite lower. Advantest and Screen Holdings both fell around 1.5 percent. Nissan Motor jumped 2.9 percent after announcing the sale of its entire stake in German carmaker Daimler.

Minutes from the Bank of Japan’s meeting on March 18 and 19 revealed ay that policymakers agreed the central bank’s priority should be to keep the yield curve stably low while the economy remains under the strain caused by the COVID-19 pandemic.

Australian markets closed lower and the Aussie dollar took a beating after China said it would end economic dialogue with Canberra.

The benchmark S&P/ASX 200 Index dropped 34.10 points, or 0.5 percent, to 7,061.70, while the broader All Ordinaries Index ended down 38.20 points, or 0.5 percent, at 7,306.

BHP and Rio Tinto rose 1-2 percent after copper hit a fresh 10-year high overnight on signs of recovery in major economies.

Tech stocks fell, with buy-now-pay-later giant Afterpay plunging 7 percent to extend losses for a fifth consecutive session.

Energy stocks turned in a mixed performance. National Australia Bank shares tumbled 3 percent despite the lender reporting a 48.1 percent surge in cash earnings for the first half.

Shares in Nearmap plummeted more than 23 percent after the aerial mapping firm said it will vigorously defend itself against legal action by U.S. rival Eagleview.

Seoul stocks advanced as hopes for a global economic rebound offset inflation worries. The benchmark Kospi rallied 31.37 points, or 1 percent, to finish at 3,178.74.

Steel, heavy industries and chemical companies rose on expectations of improved earnings, while chipmaker SK Hynix and chemical firm LG Chem both fell around 2 percent.

Europe

European are turning in a lackluster performance on Thursday as investors react to a slew of earnings and economic reports.

The Bank of England kept its interest rate and quantitative easing unchanged at the latest meeting, as widely expected.

Earlier in the day, Norway’s central bank retained its policy rate but reiterated that the rate will be hiked in the latter half of this year.

While the U.K.’s FTSE 100 Index is up by 0.1 percent, the French CAC 40 Index is down by 0.1 percent and the German DAX Index is down by 0.2 percent.

Automaker Volkswagen has moved to the downside, giving up earlier gains after raising its 2021 operating margin targets.

Airline Air France-KLM has also fallen after posting a wider first quarter operating loss and announcing it is considering raising more capital.

On the other hand, satellite operator SES has shown a substantial move to the upside after announcing a €100 million stock buyback.

Shares of Anheuser-Busch InBev have also moved sharply higher after the brewer reported stronger than expected earnings.

Unicredit has also rallied as the bank posted better than expected results for the first quarter, helped by strong trading and falling provisions.

Societe Generale shares have also surged after the bank reported net income for the first quarter that handily beat expectations.

Retailer Next has also shown a notable advance as it raised full-year profit forecasts for the second time in two months.

Superdry shares have also spiked. The clothing retailer said it has returned to revenue growth in the fourth quarter of fiscal 2021, boosted by its ecommerce division.

In economic news, Eurozone retail sales grew for the second straight month in March, but the pace of growth weakened from February, Eurostat reported.

Retail sales rose 2.7 percent in March from February, when volume was up 4.2 percent. However, the pace of growth exceeded the economists’ forecast of 1.5 percent.

On a yearly basis, retail sales rebounded 12 percent, following a 1.5 percent drop in February. This was also faster than the 9.6 percent increase economists had forecast.

German factory orders growth accelerated more than expected in March, data from Destatis revealed. Factory orders increased 3 percent month-on-month in March, faster than the revised 1.4 percent increase seen in February. Orders were expected to climb 1.7 percent.

On a yearly basis, new order growth increased sharply to 27.8 percent from 5.8 percent in the previous month.

The U.K. service sector grew at the fastest pace since October 2013, driven by sharp increases in business and consumer spending amid easing of restrictions related to the COVID-19 pandemic, final data from IHS Markit showed.

The Chartered Institute of Procurement & Supply services business activity index advanced to 61.0 in April from 56.3 in March. The score was well above the flash estimate of 60.1.

U.S. Economic Reports

With the more closely watched monthly jobs report looming, the Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits fell by much more than expected in the week ended May 1st.

The report said initial jobless claims slid to 498,000, a decrease of 92,000 from the previous week’s revised level of 590,000.

Economists had expected initial jobless claims to edge down to 540,000 from the 553,000 originally reported for the previous week.

With the much bigger than expected decrease, jobless claims once again fell to their lowest level since hitting 256,000 in the week ended March 14, 2020.

The Labor Department released a separate report showing productivity rebounded by more than expected in the first quarter of 2021.

The report said labor productivity spiked by 5.4 percent in the first quarter after tumbling by a revised 3.8 percent in the fourth quarter of 2020.

Economists had expected productivity to surge up by 4.3 percent compared to the 4.2 percent nosedive that had been reported for the previous quarter.

Meanwhile, the report showed unit labor costs edged down by 0.3 percent in the first quarter after soaring by a revised 5.6 percent in the fourth quarter.

Unit labor costs were expected to slump by 1.0 percent compared to the 6.0 percent jump that had been reported for the previous quarter.

At 9 am ET, New York Federal Reserve President John Williams is scheduled to give opening remarks before the New York Fed Web Series on Culture: Purpose and the Employee as Stakeholder.

Dallas Federal Reserve President Robert Kaplan is scheduled to participate in moderated question-and-answer session before the virtual 29th Annual Hyman P. Minsky Conference on the State of the U.S. and World Economies at 10 am ET.

At 1 pm ET, Atlanta Federal Reserve President Raphael Bostic is due to speak and participate in a discussion on “Working With the Atlanta Fed to Help the Economy Work for Everyone” before the virtual Consumer Financial Protection Bureau 2021 Research Conference.

Cleveland Federal Reserve President Loretta Mester is also scheduled to participate in a fireside chat before the virtual University of California, Santa Barbara Economic Forecast Project at 1 pm ET.

At 6:05 pm ET, Dallas Fed President Kaplan is due to participate in moderated conversation on national and global economic issues before the virtual Global Perspectives series.

Stocks In Focus

Shares of Zynga (ZNGA) are seeing significant pre-market strength after the mobile game producer reported first quarter earnings slightly below analyst estimates but raised its full-year guidance.

Online payment service PayPal (PYPL) is also likely to move to the upside after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

Meanwhile, shares of Etsy (ETSY) are moving sharply lower in pre-market trading after the online crafts marketplace reported better than expected first quarter results but warned of slowing user growth.

Rocket Mortgage and Quicken Loans parent Rocket Companies (RKT) may also come under pressure after reporting first quarter earnings in line with estimates but providing disappointing guidance.