Futures Pointing To Initial Weakness On Wall Street

The major U.S. index futures are currently pointing to a lower open on Monday, with stocks likely to move to the downside as trading resumes following the long Easter weekend.

Renewed concerns about the outlook for interest rates may weigh on the markets following Friday’s relatively strong monthly jobs report.

The Labor Department’s closely watched report, which was released while the markets were closed for Good Friday, showed employment in the U.S. increased roughly in line with economist estimates in the month of March.

The report said non-farm payroll employment climbed by 236,000 jobs in March after jumping by an upwardly revised 326,000 jobs in February.

Economists had expected employment to rise by about 240,000 jobs compared to the addition of 311,000 jobs originally reported for the previous month.

Meanwhile, the Labor Department said the unemployment rate edged down to 3.5 percent in March from 3.6 percent in February. The unemployment rate was expected to be unchanged.

Trading activity may be somewhat subdued, however, as traders look ahead to key inflation data later in the week along with reports on retail sales and industrial production as well as the minutes of the latest Federal Reserve meeting.

After coming under pressure early in the session, stocks showed a notable turnaround over the course of the trading day on Thursday. The major averages climbed well off their worst levels of the day and into positive territory.

The major averages all closed higher on the day, although the Dow inched up just 2.57 points or less than a tenth of a percent to 33,485.29. The Nasdaq advanced 91.09 points or 0.8 percent to 12,087.96 and the S&P 500 rose 14.64 points or 0.4 percent to 4,105.02.

For the holiday-shortened week, the Dow climbed by 0.6 percent, while the S&P 500 edged down by 0.1 percent and the tech-heavy Nasdaq slumped by 1.1 percent.

The early weakness on Wall Street partly reflected lingering concerns about the economic outlook following the recent release of some disappointing data.

The Labor Department released a report this morning showing a drop in initial jobless claims in the week ended April 1st, although the decrease came from a notably upwardly revised level.

The Labor Department said initial jobless claims fell to 228,000, a decrease of 18,000 from the previous week’s revised level of 246,000.

Economists had expected initial jobless claims to inch up to 200,000 from the 198,000 originally reported for the previous week.

The Labor Department noted that beginning with the latest data, the methodology used to seasonally adjust the national initial claims and continued claims reflects a change in the estimation of the models.

Matthew Martin, U.S. Economist at Oxford Economics said the updated seasonal adjustment factors led to upwards revisions to the claims data over most of the last five years.

“The last 10 weeks saw on average 30k upward revision to claims, pointing to a labor market that’s less tight than previously estimated,” Martin added.

Selling pressure waned shortly after the start of trading, however, as traders seem reluctant to make significant moves ahead of the release of the Labor Department’s more closely watched employment report on Friday.

Software stocks showed a significant move to the upside over the course of the session, driving the Dow Jones U.S. Software Index up by 1.5 percent.

Considerable strength was also visible among biotechnology stocks, as reflected by the 1.3 percent gain posted by the NYSE Arca Biotechnology Index.

Banking stocks also saw notable strength on the day, while energy stocks came under pressure despite an uptick by the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index fell by 1.4 percent and 1.3 percent, respectively.

Commodity, Currency Markets

Crude oil futures are edging up $0.13 to $80.83 a barrel after inching up $0.09 to $80.70 a barrel last Thursday. Meanwhile, after slipping $9.20 to $2,026.40 an ounce in the previous session, gold futures are falling $11.40 to $2,015 an ounce.

On the currency front, the U.S. dollar is trading at 133.12 yen versus the 132.16 yen it fetched on Friday. Against the euro, the dollar is trading at $1.0858 compared to last Friday’s $1.0905.

Asia

Asian stocks rose broadly in thin holiday trading on Monday, with Australian, New Zealand and Hong Kong markets closed for Easter Monday.

The dollar edged higher and gold prices fell as solid U.S. jobs figures for March, rising wages and an historically low unemployment rate suggested that the world’s largest economy remains on solid footing despite the nine interest-rate hikes by the Federal Reserve over the past year.

Analysts now expect the Fed to raise interest rates by 25 basis points at its May 2-3 meeting.

A closely watched inflation report as well as the release of minutes of the Fed’s March meeting due this week may provide clear guidance about interest rates.

As recession worries mount, traders also looked ahead to the 2023 Spring Meetings of the World Bank and the International Monetary Fund taking place in Washington D.C. this week for direction.

Chinese shares fluctuated before ending lower due to a dramatic escalation in China-Taiwan tensions. The benchmark Shanghai Composite Index dropped 0.4 percent to 3,315.36.

After Beijing started a three-day “combat readiness patrol,” the Taiwanese Defense Ministry claimed it had detected as many as 70 Chinese military aircraft and 11 PLAN vessels around Taiwan.

Japanese shares advanced as investors awaited Kazuo Ueda’s first news conference as Bank of Japan Governor later in the day.

The Nikkei 225 Index rose 0.4 percent to 27,633.66, while the broader Topix closed 0.6 percent higher at 1,976.53. Shipping firms led the surge, with Nippon Yusen KK climbing 3.5 percent.

Video game maker Nintendo jumped 4 percent, while Disney Park operator Oriental Land rallied 2.7 percent to reach a one-year high.

Seoul stocks rose notably to hit a nearly eight-month high, led by gains in large-cap tech stocks. The Kospi rallied 0.9 percent to 2,512.08 on signs that inflationary pressure in the U.S. employment is easing.

Samsung Electronics rose 1.1 percent and SK Hynix added 1.8 percent. LG Energy Solution jumped 2.8 percent and its parent firm LG Chem soared over 5 percent on growing expectations the companies will benefit from a new U.S. law on giving subsidies to electric vehicle buyers.

Europe

The major European markets remain closed on the day in observance of Easter Monday.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on wholesale inventories in the month of February at 10 am ET. Wholesale inventories are expected to edge up by 0.2 percent.