Weaker Than Expected Jobs Data May Lead To Mixed Open On Wall Street

The major U.S. index futures are currently pointing to a mixed open on Friday, as the Dow futures have turned negative but the Nasdaq futures have jumped.

Currently, the Dow futures are down by 44 points after the blue chip index reached a record closing high on Thursday. Meanwhile, the Nasdaq 100 futures have surged up by more than 190 points.

The mixed performance by the futures comes after the Labor Department’s closely watched monthly employment report showed much weaker than expected job growth in the month of April.

The report said non-farm payroll employment rose by 266,000 jobs in April after surging by a downwardly revised 770,000 jobs in March.

Economists had expected employment to spike by 978,000 jobs compared to the jump of 916,000 jobs originally reported for the previous month.

The Labor Department said notable job gains in leisure and hospitality, other services, and local government education were partly offset by employment declines in temporary help services and couriers and messengers.

The report also showed the unemployment rate inched up to 6.1 percent in April from 6.0 percent in March. Economists had expected the unemployment rate to drop to 5.8 percent.

While the disappointing data may raise concerns about the economic outlook, the drop in treasury yields following the release of the report may lead to strength among tech stocks.

Following the mixed performance seen during trading on Wednesday, stocks moved mostly higher over the course of the trading day on Thursday. With the upward move, the Dow reached another new record closing high.

The major averages saw further upside going into the close, reaching new highs for the session. The Dow jumped 318.19 points or 0.9 percent to 34,548.53, the Nasdaq rose 50.42 points or 0.4 percent to 13,632.84 and the S&P 500 climbed 34.03 points or 0.8 percent to 4,201.62.

The strength that emerged on Wall Street came following the release of a Labor Department report 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.

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

“Claims have declined by 33% since the start of April, further confirmation that a recovery in the labor market is well underway,” said Nancy Vanden Houten, Lead Economist at Oxford Economics.

Optimism about the economic outlook seemed overshadow concerns about potential monetary policy tightening that weighed on stocks earlier in the day.

Gold stocks moved sharply higher over the course of the session, resulting in a 3.9 percent spike by the NYSE Arca Gold Bugs Index. The rally by gold stocks came amid a substantial increase by the price of the precious metal.

Significant strength was also visible among steel stocks, as reflected by the 2.8 percent jump by the NYSE Arca Steel Index. The index once again reached its best closing level in nearly ten years.

Telecom stocks also turned in a strong performance on the day, driving the NYSE Arca North American Telecom Index up by 1.9 percent to a four-year closing high.

Networking, computer hardware and oil service stocks also saw notable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are sliding $0.65 to $64.06 a barrel after slumping $0.92 to $64.71 a barrel on Thursday. Meanwhile, after spiking $31.40 to $1,815.70 an ounce in the previous session, gold futures are jumping $24.50 to $1,840.20 an ounce.

On the currency front, the U.S. dollar is trading at 108.53 yen versus the 109.09 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.2133 compared to yesterday’s $1.2065.

Asia

Asian stocks ended mixed on Friday even as positive Chinese data boosted optimism about the global economic outlook.

The focus was on the U.S. jobs data due tonight, with economists expecting U.S. employment to jump by 978,000 jobs in April after an increase of 916,000 jobs in May. The unemployment rate is expected to dip to 5.8 percent from 6.0 percent.

China’s Shanghai Composite Index dropped 22.41 points, or 0.7 percent, to 3,418.87 after a Bloomberg report suggested that the Biden administration is likely to preserve limits on U.S. investments in certain Chinese companies. Hong Kong’s Hang Seng Index edged down 26.81 points, or 0.1 percent, to 28,610.65.

Chinese exports grew more than expected in April as global demand remained strong, data from the General Administration of Customs revealed today.

Exports advanced 32.3 percent on a yearly basis in April, while economists had forecast the growth rate to ease to 24.1 percent from 30.6 percent in March. Likewise, imports surged 43.1 percent from the previous year versus the expected growth of 42.5 percent.

The services sector in China continued to expand in April, and at a faster pace, the latest survey from Caixin revealed, with a services PMI score of 56.3, up from 54.3 in March. The report also showed that the composite index moved up to 54.7 from 53.1 in March.

Japanese shares ended little changed after a survey showed the services sector in Japan continued to contract in April, albeit at a slower pace, with a PMI score of 49.5, up from 48.3 in March.

The Nikkei 225 Index inched up 26.45 points, or 0.1 percent, to 29,357.82, with continuing concerns about the spike in daily domestic coronavirus infections and possible lockdowns capping the upside. The broader Topix closed 0.3 percent higher at 1,933.05.

According to media reports, Tokyo Governor Yuriko Koike said the situation in the capital has not improved enough to lift the state of emergency, as plans are afloat to expand and extend the ongoing pandemic-related state of emergency.

Tech stocks rose, with Advantest, Tokyo Electron and Screen Holdings gaining 1-3 percent.

Australian markets eked out modest gains as surging commodity prices helped lift miners. The benchmark S&P/ASX 200 Index rose 19.10 points, or 0.3 percent, to 7,080.80, while the broader All Ordinaries Index ended up 19.20 points, or 0.3 percent, at 7,325.20.

Mining giants BHP Group and Rio Tinto rose 0.6 percent and 1.1 percent, respectively to mark their fourth consecutive session of gains after London copper prices hit a record high, boosted by tight supply outlook and improving demand prospects.

Gold miners Northern Star, Newcrest and Evolution rallied 2-4 percent after gold priced climbed. Tech shares fell broadly, with Afterpay tumbling 4.1 percent. In the healthcare sector, heavyweight CSL shed 0.9 percent. Nuix lost 3 percent after the data forensic firm downgraded its revenue forecast.

In economic news, the services sector in Australia continued to expand in April, and at a faster rate, the latest survey from the Australian Industry Group showed, with a Performance of Services Index score of 61.0, up from 58.7 in March.

Seoul stocks rose for the third day on growing hopes of a faster than expected economic recovery around the world. The Kospi climbed 18.46 points, or 0.6 percent, to 3,197.20, with construction, energy and financial shares performing well, while tech stocks underperformed on lingering inflation worries.

South Korea posted a current account surplus of $7.82 billion in March, the Bank of Korea said in a preliminary reading. That was down from the downwardly revised $7.94 billion surplus in February (originally $8.03 billion).

Europe

Following the U.S. jobs report European stocks have turned mixed on Friday after moving higher earlier in the session on upbeat regional data.

While the French CAC 40 Index has edged down by 0.1 percent, the U.K.’s FTSE 100 Index is up by 0.4 percent and the German DAX Index is up by 0.8 percent.

Adidas has moved sharply higher as the German sportswear company raised its 2021 sales outlook despite ongoing lockdowns in Europe.

Similarly, automation company Siemens has shown a strong move to the upside after lifting its revenue and profit guidance for the year.

Aerospace engineer company Meggitt has also soared following reports that it could be a takeover target.

On the other hand, Crédit Agricole shares have fallen despite the bank posting a strong trading performance for the first quarter as provisions for potential credit losses fell.

Mall owner Klepierre has also declined after cutting its 2021 cashflow guidance due to extended lockdowns.

In economic news, German industrial production grew 2.5 percent month-on-month in March, reversing a 1.9 percent fall in February, Destatis reported. Output was forecast to climb 2.3 percent.

On a yearly basis, industrial production advanced 5.1 percent, in contrast to a 6.8 percent fall in February.

Another report revealed that German exports increased 1.2 percent on a monthly basis in March, while economists had forecast the growth to ease to 0.5 percent from 1 percent in February. Year-on-year, exports advanced 16.1 percent, reversing a 1.2 percent fall in February.

A new study suggested that hiring in the U.K. surged last month. The IHS Markit/CIPS Construction Purchasing Managers’ Index (PMI) eased to 61.6 in April from 61.7 in March.

U.S. Economic Reports

Employment in the U.S. increased by far less than expected in the month of April, according to a closely watched report released by the Labor Department on Friday.

The report said non-farm payroll employment rose by 266,000 jobs in April after surging by a downwardly revised 770,000 jobs in March.

Economists had expected employment to spike by 978,000 jobs compared to the jump of 916,000 jobs originally reported for the previous month.

The Labor Department said notable job gains in leisure and hospitality, other services, and local government education were partly offset by employment declines in temporary help services and couriers and messengers.

The report also showed the unemployment rate inched up to 6.1 percent in April from 6.0 percent in March. Economists had expected the unemployment rate to drop to 5.8 percent.

At 9 am ET, Richmond Federal Reserve President Thomas Barkin is scheduled to speak on the economic outlook before a virtual West Virginia Chamber event.

The Commerce Department is due to release its report on wholesale inventories in the month of March at 10 am ET. Wholesale inventories are expected to jump by 1.4 percent.

At 3 pm ET, the Federal Reserve is scheduled to release its report on consumer credit in the month of March. Consumer credit is expected to increase by $20.0 billion.

Stocks In Focus

Shares of Roku (ROKU) are moving sharply higher in pre-market trading after the streaming video device maker reported better than expected first quarter results and provided upbeat guidance.

Fitness equipment maker Peloton (PTON) is also likely to see initial strength after reporting a narrower than expected fiscal third quarter loss on revenues that exceeded analyst estimates.

On the other hand, shares of Beyond Meat (BYND) may come under pressure after the plant-based meat maker reported a wider than expected first quarter loss.

Restaurant chain Shake Shack (SHAK) is also seeing notable pre-market weakness after reporting weaker than expected first quarter revenues and providing disappointing guidance.