Nasdaq surges more than 1% on Friday as May jobs report cites bullish “Goldilocks” scenario
U.S. stocks rose at noon on Friday after May’s nonfarm payroll report showed less than expected gain, leading investors to bet the Federal Reserve would maintain its easy money policies longer.
Thursday, the Dow Jones closed 23.34 points, or 0.1%, at 34,577.04, ending a five-day winning streak. The S&P 500 stumbled 15.27 points, or 0.4%, to 4,192.85, while the Nasdaq Composite fell 141.82 points, or 1%, to 13,614.51.
For the week, the Dow was heading for a weekly rise of 0.5%, the S&P 500 was on track for a gain of 0.3%, while the Nasdaq was forecast for a decline of 0.3%, according to FactSet data.
What drives the market?
The May employment report of The US Department of Labor has shown that the United States created 559,000 jobs, below the Wall Street consensus estimate for a gain of 671,000, based on a poll of economists at Dow Jones and the Wall Street Journal.
Investors heaved a “sigh of relief” after today’s jobs report because it was neither so disappointing as the April reading nor so hot that it made them fear that the Federal Reserve is now accelerating the rise in interest rates, according to Bob Doll. , the new Chief Investment Officer of Crossmark Global Investments.
“It was a little low compared to consensus, but not horribly,” Doll, who joined asset manager Nuveen’s faith-based investment firm, said in a telephone interview on Friday. “The market was fearful after disappointment of last month. ”
The unemployment rate fell to 5.8% from 6.1%, against estimates of a drop to 5.9%. The official rate probably underestimates the real level of unemployment by 2 to 3 percentage points, economists say, but it is falling steadily.
The May report, however, is likely to be interpreted as bullish for the market as a whole, if it causes the Fed to delay the removal of its monetary support during the time of the pandemic, including the plan to buy it. assets of $ 120 billion per month.
“It’s pretty much a golden loop scenario, not too soft to have raised fears of a weak economic recovery, and not too strong to have raised concerns about the acceleration of the Fed’s action,” wrote Mike Loewengart, managing director of investment strategy at E-Trade Financial, in the emailed comments.
But in Doll’s opinion, the market still faces the threat of inflationary pressures.
“I don’t think everything is transient, as the Fed suggests,” Doll said. “All you have to do is live your life and see all the signs of ‘help needed’ everywhere” as companies push workers with higher wages to fill jobs, he said. . “The world of zero to 2% inflation we have lived in for a long time is probably over.”
The May Jobs Report showed that many companies have raised wages to attract workers. Average hourly wages rose 15 cents, or 0.5%, to $ 30.33 an hour last month. The labor force participation rate, another closely watched measure, edged down to 61.6%.
Charlie Ripley, senior investment strategist for Allianz Investment Management, also pointed out that wage inflation is creeping into the labor market, saying that with the decline in the labor market participation rate, “it appears that Employers may need to offer more incentives to induce workers to fill the record number of vacancies that exist.
The government data comes after data for April showed only 266,000 new jobs were created on a seasonally adjusted basis, significantly missing economists’ forecasts which averaged around 1 million.
The data on non-farm wages also follows a reading of private sector employment by Automatic Data Processing on Thursday, which reported an increase of 978,000 jobs created in May. However, ADP reports did not always align with the more closely watched government report.
President Joe Biden, at a press conference to discuss employment figures on Friday, touted the “historic progress” made since taking office in January, indicating that around 2 million jobs have been recovered.
Loretta Mester, President of the Cleveland Fed during an interview on CNBC said the Fed wants to be “very deliberately patient” on policy decisions. She also said wage gains are not fueling core inflation yet.
Separately, a report released on Friday showed that Factory orders in the United States slipped 0.6% in April, the Commerce Department said on Friday. Economists polled by the Wall Street Journal had expected a 0.2% drop, and that drop ended a string of back-to-back eleven-month increases dating back to May of last year.
Investors were also keeping tabs on discussions around a proposed infrastructure spending, after President Biden has indicated his administration would be prepared to make concessions on corporation tax to reach an agreement.
Which companies are targeted?
- Bill Ackman’s ad hoc acquisition company, Pershing Square Tontine Holdings, PSTH is close to a transaction with Universal Music Group which would value the world’s largest music company at around $ 40 billion. Pershing Square Tontine shares are down around 11.5% at midday
- Memes Stock AMC Entertainment Holdings Inc. AMC revealed Thursday afternoon that it will ask shareholders for authorization to issue up to 25 million shares, after having sold shares in a spectacular surge in its price in recent days. AMC shares rose 3.1%.
- Actions of Apple Inc. AAPL rose 1.8% ahead of the tech giant’s World Developer Conference (WWDC) next week.
- Actions of ODP Corp. ODP, rose 8.1%, after the office supplies retailer received an unsolicited $ 1.0 billion offer from Staples parent company USR Parent Inc. to buy the consumer business of ODP, which include Office Depot and OfficeMax retail store operations.
- Actions of Regeneron Pharmaceutical Inc. REGN increased by 1.3% after the company said U.S. regulators had cleared a lower dose, subcutaneous version of her treatment with COVID-19 antibodies.
- The COVID-19 vaccine jointly developed by Pfizer PFE and BioNTech BNTX has been approved for 12 to 15 year olds in the UK, Medicines and Health Products Regulatory Agency (MHRA) said friday. Pfizer shares rose 0.8% near midday while BioNTech shares jumped 6.1%.
How are the other assets doing?
- The yield on the 10-year US Treasury bill TMUBMUSD10Y, was at 1.555%, down from 1.628% on Thursday.
- The ICE US dollar index DXY, a measure of the currency against a basket of six major rivals, fell 0.4%.
- Oil futures were trading higher, with the US benchmark CL00 up 0.9% to trade at $ 69.41 per barrel; while gold futures GC00 added 1.1% to about $ 1,893.20 an ounce on Comex.
- In European equity trading, the pan-Continental Stoxx Europe 600 SXXP, +0.20% rose 0.4% on Friday to a record close bringing the week’s gains to 0.8%. London FTSE 100 UKX edged up 0.1% for a weekly gain of 0.7%.
- In Asia, the Shanghai Composite SHCOMP added 0.2%, while the Hang Seng index HSI slipped 0.2%; Nikkei 225 from Japan Nik lost 0.4%.