4:09pm: Regional banks rally
The Dow closed Friday up 547 points, 1.7%, at 33, 674, the Nasdaq Composite added 269 points, 2.3%, to 12,235 and the S&P 500 improved 75 points, 1.9%, to 4,163. The small-cap Russell 2000 index climbed 42 points, 2.5%, to 1,761.
The benchmarks all rallied even as the jobs numbers from April were hotter than expected. The US economy added 253,000 jobs last month, compared to expectations of 180,000.
One of the standout performers of the session was Apple, shares of which surged 4.7% to $173.57 after the company reported record iPhone sales in its fiscal second quarter.
Regional banks also recovered. PacWest shares rocketed more than 80% higher and Western Alliance stock gained nearly 50%.
12.05pm: Regional bank stocks rebound after JPMorgan note
US stocks were sharply higher in noon trading following better-than-expected results from Apple Inc and a bounce back in regional bank shares.
At midday, the Dow gained 408 points to 33,535, while the S&P 500 added 60 points at 4,121 and the tech-heavy Nasdaq jumped 213 points to 12,180.
“The issue originally was that deposit flight was occurring. ... But now that the pressure is no longer necessarily deposit flight, it’s this mark to market of the securities on all their books,” SoFi head of investment strategy Liz Young said.
Other notable movers included shares of DraftKings Inc, which surged 17% after the betting company posted better-than-expected revenue for its latest quarter and increased its full-year outlook.
9:40am: Fed pause on the cards?
US stocks moved higher at the open as investors weighed up April’s jobs report which showed the US economy added more jobs than expected last month, while employment growth and wage growth both eased.
Just after the opening bell in New York, the Dow Jones had added 392 points or 1.2% at 33,520 points, the S&P 500 was up 45 points or 1.1% at 4,106 points, and the Nasdaq Composite had gained 125 points or 1% at 12,091 points.
Evelyn Partners chief investment strategist Daniel Casali said the key takeaway from today’s jobs data was that both employment growth and wage rates were slowing, increasing the likelihood of the Fed pausing its interest rate hiking cycle.
“This latest non-farm payrolls of 253,000 is below the 12-month moving average of 339,000, indicating a softening employment trend ahead,” Casali said.
“Importantly, employment growth has slowed to an annual 2.9% increase in April, a steady deceleration over the past year. Average weekly hours in the private sector have tailed off to their lowest level since the pandemic and is an early indicative signal that businesses are cutting back on labour.”
However, he noted that, even with this softening in the jobs and wage data, there was still a long way to go before the Fed could feel comfortable that the labor market has eased sufficiently to be consistent with 2% inflation over time.
“So, while the Fed may be unlikely to cut interest rates to match the downward shift in the Fed Futures market, the US Central Bank is still coming to an end in its hiking cycle,” Casali said.
“Provided that interest rate expectations do not rise further, it could provide the backdrop for equities to continue their recovery.”
Pantheon Macroeconomics chief economist Ian Shepherdson said this report was clearly not weak enough to change the Fed’s mind just yet.
“But a continuation of the downward trend in payrolls will soon see the numbers heading into a range in which the Fed can start to back away from its oft-stated position that the labor market is too tight, and that will open the door to lower rates, assuming core inflation continues to soften,” Shepherdson said.
“We’re sticking to our view that the Fed will turn explicitly neutral in June but that the first easing will have to wait until September.”
8:40am: Key jobs report comes in hot
The US economy added more jobs than expected during April, a sign of continued strength in the labor market amid inflationary pressures, according to new data from the Bureau of Labor Statistics.
Total non-farm payroll employment rose by 253,000, above the 180,000 new jobs expected by Wall Street analysts.
The unemployment rate slipped to 3.4%, while analysts had expected a slight uptick to 3.6%.
Employment in professional and business services, health care, leisure and hospitality, and social assistance continued to trend up in April, the Bureau noted.
Just after the report was released, futures for the S&P 500 were up 0.7%, the Nasdaq up 0.7%, and the Dow Jones had added 0.6% in pre-market trading.
7:50am: April jobs report eyed
US stocks are currently expected to open modestly higher on Friday morning, supported by above-forecast earnings from Apple Inc, released after Thursday's close, but much will depend on the April non-farm payrolls report, due out at 8.30am ET.
Investors are still nervous about the forward path for Federal Reserve monetary policy following the US central bank's 25 basis point rate hike on Wednesday, and the jobs report is always closely watched. Economists predict that 180,000 jobs were added last month.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank commented: "Data released yesterday revealed that US unemployment benefit applications jumped the most in six weeks, as a sign that the US labour market could be loosening. Earlier this week, job openings data also came in softer than expected, yet ADP report released on Wednesday came in double the expectations, at 300,000 new private jobs."
"Today, the NFP data is expected to reveal that the US economy added around 180K new nonfarm jobs last month, for a steady wage growth at 4.2% on annual basis, and a slight uptick in unemployment from 3.5% to 3.6%.
"A soft NFP read, and ideally softening wages growth could further fuel the Fed doves and boost Fed rate cut expectations," she added.
Ahead of the data, futures for the Dow Jones Industrial Average (DJIA) were up 0.5%, while those for the S&P 500 rose 0.7%, and contracts for the Nasdaq 100 futures also added 0.7%.
On Thursday, the three major US stock indexes closed lower for the fourth consecutive day as renewed fears of contagion risk from the embattled regional bank sector after a tumble by PacWest depressed investors. The DJIA closed 0.9% lower at 33,127, while the S&P 500 lost 0.7%, and the Nasdaq Composite fell 0.5%.
The indexes are on course for a week of losses, the worst performance for all three since March 10 - the DJIA is currently down 2.8%, the S&P 500 is off 2.6%, and the Nasdaq Composite has lost 2.1%.
However, on the corporate front, Apple gave investors a boost after Thursday's close as the tech giant posted beats on the top and bottom lines for the fiscal second quarter, propelled by iPhone sales. Apple shares gained more than 2% after-hours trading, with the announcement of a $90bn share buyback plan, unchanged from last year, also helping.
Ozkardeskaya at Swissquote Bank pointed out: "Note that Apple and Microsoft, together, made up around half of the gains in the S&P500 this year. And thanks to their sizeable balance sheets – and the falling yields, big tech companies remain a refuge for equity investors.
"That certainly explains why the S&P500 has been relatively resilient to the bank turmoil. What’s risky however is that, if winds change direction for the Big Tech, we could rapidly see gains in the S&P500 crumble."