Wall Street Breakfast: Cooling Labor Market
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In the nonfarm payrolls report due to be released at 8:30 AM ET, economists expect that 178K of jobs were added in April, down from the 236K increase in March. While the April estimate is relatively robust, it would be far lower than the average monthly gain of 344K over the previous six months. Generally, the economy needs to add about 100K jobs to absorb new entrants into the workforce (the higher the number of new jobs above that figure, the harder it is for employers to hire as demand outstrips supply).
Snapshot: With the labor market remaining so tight, the Federal Reserve has felt confident in its inflation fight, raising its interest rates without inflicting too much damage on the economy. On Wednesday, the central bank increased its policy rate by another 25 basis points, bringing it to 5.00%-5.25%, the highest level since 2007. Powell also said there were signs that supply and demand in the labor market are starting to come into better balance, but "the labor market remains very tight."
Another data point to watch will be the unemployment rate, which is expected to tick up to 3.6%, from 3.5% reported in March. Wage growth will also be eyed, with average hourly earnings expected to rise 0.3% M/M in April, unchanged from March. On a Y/Y basis, that comes to a 4.2% increase, the same as in the prior month, while the labor force participation rate will be analyzed for its effects on wage-driven inflation.
Outlook: No doubt the Fed policymakers will parse the report for any signs of reaccelerating wage growth or renewed strength in hiring. "If there is one prime focus of the Fed's inflation fears, it is the strong labor market," writes SA contributor Harry Mamaysky. If the U.S. does indeed add 180K jobs in April, it would mark the smallest monthly gain since December 2019, excluding the losses that occurred during the first year of the coronavirus pandemic. (7 comments)
Apple (AAPL) shares rose 2.5% in AH trading on Thursday after the tech giant reported Q2 results that topped muted analyst expectations, while unveiling a new $90B share buyback program and raising its quarterly dividend. Revenue was helped by iPhone sales and Services, though some weakness was seen in Mac and iPad segments, and overall sales fell for the second quarter in a row. "We expect our June quarter year-over-year revenue performance to be similar to the March quarter, assuming that the macroeconomic outlook does not worsen from what we are projecting today," Apple CFO Luca Maestri added on a conference call, while CEO Tim Cook said in a follow-up interview that the iPhone maker remains "extremely prudent on hiring... just at a lower clip level than we were before." (161 comments)
With artificial intelligence in the headlines and fears about what it can do to society, the White House convened a meeting yesterday that sought to explore the dangers to public safety. Vice President Kamala Harris and senior staff met with the CEOs of leading AI companies like Google (GOOG, GOOGL), Microsoft (MSFT), OpenAI and Anthropic. "It was a frank conversation, which included discussion on three main things," Press Secretary Karine Jean-Pierre said at a press briefing, explaining the requirements needed to ensure AI systems are secure from malicious actors and attacks. The Biden administration previously put out a formal request for comment on potential AI regulation, while stocks continue to move on AI buzz: the latest beneficiary is Advanced Micro Devices (AMD). (23 comments)
U.S. federal and state officials are looking into whether "market manipulation" has prompted the recent volatility in banking shares, according to Reuters, with short sellers raking in nearly $380M in paper profits on Thursday alone from betting against regional banks. The brutal selloff saw PacWest (NASDAQ:PACW) and Western Alliance (NYSE:WAL) plunge 51% and 39%, respectively, as investors grew nervous about "strategic options," as well as the possibility of stockholder wipeout. Others are attributing the drops to self-fulfilling prophecies, though First Horizon (NYSE:FHN) also tumbled after calling off its merger with TD Bank (TD). Meanwhile, billionaire activist investors like Bill Ackman and Nelson Peltz are warning that more regional banks will fail unless deposit rules change, while the FDIC is looking to propose new payments on larger banks to replenish its deposit insurance fund. (18 comments)
Today's Markets
In Asia, Japan closed. Hong Kong +0.4%. China -0.5%. India -1.1%.
In Europe, at midday, London +0.4%. Paris +0.5%. Frankfurt +0.8%.
Futures at 6:30, Dow +0.4%. S&P +0.6%. Nasdaq +0.6%. Crude +2.1% to $70.01. Gold -0.5% to $2045.10. Bitcoin -0.2% to $29,104.
Ten-year Treasury Yield +6 bps to 3.41%
Today's Economic Calendar
8:30 Non-farm payrolls
1:00 PM Baker Hughes Rig Count
1:00 PM Fed's Bullard: U.S. Economy and Monetary Policy
3:00 PM Consumer Credit
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