07 June 2021

Investors Cheer Weakness in US Jobs Report

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News shaping
the markets today

     

What’s happening: US stocks surged on Friday following the release of the jobs report for May.

What happened: Wall Street recorded gains for the week, driven by a sharp rise in technology stocks on Friday.

The Nasdaq 100 jumped more than 200 points on the last trading day of the week, with the Labor Department reporting lower-than-expected growth in nonfarm payrolls (NFP).

Why it matters: The US economy created 559,000 jobs in May, significantly higher than the 278,000 job additions in the previous month. However, May’s reading came in below the consensus estimate of 671,000.

The unemployment rate declined to 5.8%, from 6.1% in April, and surpasses the market expectations of 5.9%.

Investors had been worried that a strong jobs report would result in the Federal Reserve deciding to pull back its covid-19 stimulus. The latest jobs report relieved market concerns around the central bank tightening its monetary policy any time soon.

The 10-year Treasury yield edged lower following the release of the data. Bond yields have risen sharply in recent months amid inflation concerns.

The so-called “meme stocks” remained in focus through the week but traded lower on Friday. Shares of AMC Entertainment fell around 7% on Friday but managed to add over 80% last week. BlackBerry’s stock declined about 13% on Friday but added 37% for the week.

The Dow Jones index surged 179.35 points to close at 34,756.39 on Friday, while the S&P 500 gained around 0.9% to reach 4,229.89, just 0.2% shy of the record high it achieved last month. The Nasdaq 100 outperformed the other major US indices, spiking nearly 1.8% to settle at 13,770.77.

All major US indices notched gains for the week, with the 30-stock Dow Jones index and the S&P 500 up around 0.7% and 0.6%, respectively. The tech-heavy Nasdaq 100 gained around 0.6%.

What to watch: Investors await data on consumer credit from the US. Consumer credit, which rose by $25.84 billion in March, is expected to rise another $21 billion in April. Markets will also keep an eye on the country’s covid-19 vaccine drive.

Markets will also closely monitor any developments around Biden’s proposed infrastructure spending package.

The Markets Today

     

The Canadian dollar will be in focus today, after closing higher on Friday.

Context: The CAD/USD forex pair rose on Friday, after both countries released their reports on job additions and unemployment. Although Canada’s jobs report was disappointing, especially versus the US one, the loonie recorded gains.

Details: The Canadian economy lost 68,000 jobs in May, recording a bigger decline than experts had projected. The job market was impacted by Canada experiencing the third wave of covid-19 and the resulting lockdowns weighing on the economy. The country’s unemployment rate rose to 8.2% in May, from 8.1% in the prior month.

Investors focused on Canada’s PMI, which climbed to 64.7 in May, from 60.6 in the earlier month. The PMI reading signalled an acceleration in the growth of the country’s economic activity and supported the loonie.

The price of crude oil, one of Canada’s major exports, rose around 1.2% to $69.62 per barrel on Friday, buoyed by a rebound in energy demand. This, too, sent the CAD/USD forex pair higher on Friday.

The Canada's dollar has been trading higher this year, amid rising prices of commodities and a more hawkish stance by the country’s central bank.

The CAD/USD forex pair rose around 0.3% to 1.2075, after hitting its lowest level since May 27 earlier in the session. However, the loonie soon pared some gains but still settled higher, at 1.2079, on Friday.

What to watch: The Bank of Canada is scheduled to announce its interest rate decision on Wednesday. The central bank is widely expected to leave its key overnight rate unchanged at 0.25%. Markets widely expect the central bank to scale back its bond purchases after its July policy meeting.

The covid-19 pandemic remains one of the top concerns for markets, with total global infections surpassing 173.2 million.

Other Markets: European trading indices closed higher on Friday, with the FTSE 100, German DAX 30, French 40 and STOXX Europe 600 up by 0.07%, 0.39%, 0.12% and 0.39%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s factory orders, South Africa’s foreign exchange reserves, Spain's industrial production and consumer confidence indicator, UK’s Halifax house price index, China's foreign exchange reserves, Mexico’s gross fixed investment, Brazil's central bank focus market readout, Russia’s foreign exchange reserves, gross domestic product and inflation rate as well as Turkey’s treasury cash balance.

 

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