4:11pm: Nasdaq positive for the fifth-striaght day
The Dow closed Friday down 45 points, 0.1%, at 31,339, while the Nasdaq Composite added 14 points, 0.1%, to 11,635 and the S&P 500 ticked down 3 points, less than 0.1%, to 3,889.
Trading was up and down all session, with the benchmarks each spending long stretches on both sides of the flatline. That said, the Nasdaq was positive every day this week, and the major indexes all gained ground on the week.
Investors tried to square a largely positive jobs report with the current inflationary pressure and what the Fed will decide to do next.
“This report is good news is bad news for the market today...you couldn’t ask for anything better from this jobs report in terms of broad gains, low unemployment, the number was above expectations,” said Michael Arone of State Street Global Advisors, as reported by CNBC. “Wages were growing but at a slower rate. …That was a good thing, and yet the markets kind of shrugged their shoulders here because at the end, the conclusion is the Fed is going to go by 75 basis points.”
12.05pm: Stocks climb out of the red
US stocks managed to claw their way into positive territory at midday as June’s strong jobs report has suggested that the US economy is in better shape than expected.
At noon, the Dow Jones Industrial Average had added 12 points at 31,397 points and the Nasdaq Composite was up 11 points at 11,632 points, while the S&P 500 was steady at 3,903 points.
IG senior market analyst Joshua Mahony said the latest US jobs report had helped alleviate fears that the widely anticipated recession could begin to hit business investment and hiring decisions.
“Nevertheless, we have seen some weakness for US markets as better-than-expected payrolls, and stable unemployment and wages strengthen the case for a 75 basis point hike in three weeks’ time,” he said. “Inflation remains the key concern for the Fed, and the absence of major red flags in the economy serves to raise the likeliness of Fed action to stifle price pressures.”
CMC Markets UK chief market analyst Michael Hewson noted today’s job numbers, which would ordinarily be good news, had instead raised the question about how much more US stocks markets could rally in the face of a tightening Fed as it doubled down on its inflation-targeting credentials.
“The strong number not only keeps the focus on 75 basis points in July, which now seems a done deal, but also means we could see a similar move of 75 basis points in September, especially if we get a strong CPI number next week,” Hewson said.
“This has been reflected in US treasury yields with the US 10-year surging back above 3%, while the 2-year yield has moved above 3.1%, although they have since slipped back from their intraday highs."
11.05am: Proactive North America headlines:
Twitter lays off 30% of its employees - report
Thor Explorations reports 11% gold production increase from Segilola mine in second quarter
Grande Portage Resources kicks off its summer drill program at the Herbert Gold project in Alaska
GreenPower Motor Company boosts offering with acquisition of Lion Truck Body
Liberum sets a 1,380p price target for Caledonia Mining, based on forecasts of strong free cash flow
Mountain Boy Minerals begins geophysical survey work at Telegraph Copper-Gold Project
Credit Suisse sets a 2,500p price target for Endeavour Mining, based on strong growth potential and solid track record
In Voyager Digital (CSE:VYGR, OTCQX:VYGVF)’s messy bankruptcy, Sam Bankman-Fried holds considerable sway
American Eagle Gold says to make strategic shift to focus on exploration in Canada, change company name to Drillore Exploration
Nextech AR Solutions launches significant upgrades to augmented reality spatial mapping platform ARWay
9.45am: Stocks fall on jobs beat
US stocks opened lower on Friday as investors weighed up new jobs data which showed that the American labor market remained tight in June despite reports of layoffs amid recession talk.
Just after the open, the Dow Jones Industrial Average had shed 78 points at 31,306 points.
The S&P 500 had dipped 18 points at 3,884 points and the Nasdaq had lost 100 points at 11,521 points.
Shares of Twitter were down about 4% just after the open following reports the company had fired one-third of its recruitment team and amid renewed doubts that billionaire Elon Musk’s deal to buy the social media company would hold up.
Meanwhile, shares of Levi Strauss & Co (NYSE:LEVI) had jumped about 4% after the jean maker posted its 2Q results, with both its earnings and revenue topping analyst expectations.
The latest US employment data - which showed job creation remained strong, unemployment remained at 3.6%, and wage growth continued to exceed 5% year-on-year – made the case for a 75 basis point interest rate hike in July strong, according to ING chief international economist James Knightley.
“Today’s report is a rare spot of good news after a disappointing run of activity numbers,” he said. “While markets and economists are increasingly worried about the economic outlook, it appears companies remain upbeat on their own progress with the appetite to hire appearing undimmed.”
But while this report suggested the US economy was in good health, Knightley noted that this firmed up expectations of a 75 basis point hike in July.
“It makes it all the more likely that the Fed will respond aggressively to the inflation threat with further significant rate hikes,” he said. “We look for additional 50 basis point moves in September and November with a final 25 basis point hike in December,” he said.
Pantheon Macroeconomics chief economist Ian Shepherdson noted that there were solid job gains across most sectors in June, but leading payroll indicators made it clear that payroll gains would slow further over the next few months.
“Overall, the jobs data support our view that talk of the economy being in a recession right now is fanciful, while the wages numbers suggest inflation pressure is easing,” he said. “The story today is much more about post-Covid catch-up hiring, but jobs create incomes no matter why they are being created, and solid job and income growth makes a recession very unlikely.”
8.45am: Labor market remains tight
US employment remained strong in June adding 372,000 non-farm payroll jobs, according to new data released by the US Bureau of Labor Statistics this morning.
This figure shows a slight cooling in the job market, down from the 390,000 jobs added in May. However, it came in far higher than expected, above the 250,000 forecast by a group of economists surveyed by the Wall Street Journal.
The jobless rate remained at 3.6% for the fourth month in a row, in line with the consensus analyst expectation.
In June, notable job gains occurred in the professional and business services, leisure and hospitality, and health care sectors.
US stocks dipped following the release of the jobs data, with futures for the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.5%, and the Nasdaq Composite down 1% in pre-market trading.
6:30am: Little change seen in seesaw trade
US stocks are expected to open little changed on Friday ahead of June US non-farm payrolls (NFP) data that are expected to show a robust though cooling labor market.
Economists are expecting US employers to have added 250,000 jobs in June, down from 390,000 in May.
Futures for the Dow Jones Industrial Average were trading 0.1% higher pre-market, while those for the broader S&P 500 index were down 0.1% and futures for the tech-laden Nasdaq-100 lost 0.2%.
Swissquote senior analyst Ipek Ozkardeskaya said the consensus estimate that the US economy added more than 250,000 jobs in June is a strong number, even for pre-pandemic times, while the unemployment rate is seen stable at 3.6%, just above the 2019 lows.
A strong read could bring forward the idea that the Federal Reserve will take a more aggressive approach to fight inflation, sending the US economy into a soft landing, while a lower-than-expected read will confirm that the slowdown had begun, forcing the Fed to soften its tone.
“In both cases, there is a large room for market interpretation. It’s difficult to predict what direction the market would take,” she added.
Fawad Razaqzada, market analyst with City Index and FOREX.com, said the Fed will not want to focus away from inflation just yet although it knows that the economic outlook will deteriorate with a tighter monetary policy.
“Any surprise weakness in employment isn’t going to deter the Fed from its hawkish path since it is determined to create a soft landing to bring down inflation. After all, the Fed likes to see a trend before making a change in policy. One month’s worth of data isn’t going to change their outlook about the labour market,” he added.
Razaqzada said the stock market has priced in a 90% probability that the Fed will raise its benchmark rate by 75 basis points.
“Surging inflation and weakness in economic growth have been the story of 2022 so far. More recently, worries about the latter has leapfrogged the former. The market has started to price in a recession. Yield curves have inverted. Commodities have tanked. The dollar has roared higher against all major currencies. Friday’s jobs report is not going to change that outlook,” he added.
In energy markets, WTI crude oil futures were down 0.9% at $102.64 a barrel, while Brent crude futures were 0.1 % higher at $104.79.
Contact the author at jon.hopkins@proactiveinvestors.com