10 May 2021

US Stocks Hit Record Highs Despite Weak NFP Report

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News shaping
the markets today

     

What’s happening: US stocks closed higher on Friday, climbing to fresh record levels.

What happened: Wall Street stocks climbed despite the US Labor Department releasing a disappointing jobs report for April, which showed fewer than expected job additions.

The release of the jobs report was followed by a spike in tech stocks, helping two of the major US indices end the week in record zone.

Why it matters: The US economy added just 266,000 in April, much lower than the consensus projection of 1 million. The country’s unemployment rate rose to 6.1% last month, higher than the market expectation of 5.8%.

Investors had been concerned after US Treasury Secretary Janet Yellen made a statement about the need to raise interest rates. Friday’s weak nonfarm payrolls data, however, made it less likely for the Federal Reserve to pull back its easing monetary policy environment, including record low interest rates and significant bond buying.

Tech stocks outperformed after the release of the NFP report. Shares of Microsoft, Alphabet Netflix, and Apple recorded gains on Friday.

The Dow Jones index jumped 229.23 points to a record high of 34,777.76 on Friday. The S&P 500 added 0.7% to settle at a new high of 4,232.60. The tech-laden Nasdaq 100 jumped 0.78% to close at 13,719.63.

For the week, the 30-stock index added 2.7%, breaking a two-week losing streak, while the S&P 500 gained 1.2%. Despite the recovery on Friday, tech stocks shed 1% for the week.

What to watch: Investors await data on ISM New York index and consumer inflation expectations from the US. The ISM New York Index, which rose to 37.20 in March, is expected to improve further to 48% in April.

Rising covid-19 cases remain one of the top concerns for markets, with total global infections exceeding 157.9 million.

The Markets Today

     

Crude oil will be in focus today, after closing higher on Friday.

Context: Oil futures recorded gains last week as traders cheered further reopening in the US and Europe. Investors remain concerned, however, about the significant rise in covid-19 infections in India.

Details: Strong economic reports from the US and China helped crude oil trade higher last week.

Market sentiment was also supported by a ramp up in covid-19 vaccine distribution in Europe, which could lift the oil demand outlook for the year.

The upside to crude oil prices remained constrained, however, with the continued spike in covid-19 cases in India, the world’s third-biggest importer of oil. Investors remain jittery as the country logged more than 400,000 new cases for four consecutive days. India’s Prime Minister Narendra Modi is under increasing pressure to announce stricter lockdowns in the country, which might further impact overall oil demand.

WTI (West Texas Intermediate) crude for June delivery rose 0.3% to close at $64.90 per barrel on the NYMEX (New York Mercantile Exchange) on Friday. Prices for the US benchmark closed the week higher by 2.1%.

July Brent crude added 0.3% to settle at $68.28 per barrel on ICE Futures Europe. The global benchmark prices added 2.3% for the week.

In other energy commodities trading, June gasoline gained 0.6% to reach $2.13 a gallon, adding 2.4% for the week. June natural gas ended the week at $2.96 per million British thermal units, recording a 1% rise on Friday and a weekly gain of 0.9%

What to watch: Traders will continue to monitor the covid-19 situation in India as a complete lockdown in the country would exert significant pressure on crude prices in the near term.

Markets will also keep an eye on announcements by the OPEC+ group to curtail supply in a bid to provide some support to oil prices.

Other Markets: European trading indices closed higher on Friday, with the FTSE 100, German DAX 30, French 40 and the STOXX Europe 600 up by 0.76%, 1.34%, 0.45% and 0.89%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s unemployment rate, UK’s Halifax house price index, South Africa's SACCI business confidence index as well as Brazil's central bank focus market readout.

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