Friday, May 5, 2023

Markets rally after a strong jobs report

Dow jumped 441, advancers over decliners 6-1 & NAZ gained 203.  The MLP index added 1+ to the 216s & the REIT index went up 4+ to 370.  Junk bond funds rose along with stocks & Treasuries were sold, raising yields.  Oil recovered 2+ to the 71s & gold sank 38 to 2017.

AMJ (Alerian MLP Index tracking fund)


 

 




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US job growth continued to chug along at a healthy clip in Apr as the labor market remained surprisingly resilient even in the face of rising interest rates, declining economic growth & bank turmoil.  Employers added 253K jobs in Apr, the Labor Dept said in its monthly payroll report, easily beating the 180K jobs forecast.  The unemployment rate ticked lower to 3.4%, a historically low level, as more workers left the labor force.  Wages also accelerated last month, with average hourly earnings, a key measure of inflation, rising 0.5%, more than the 0.3% estimate.  On an annual basis, wages rose 4.4% in Apr.  Although the report pointed to solid hiring in Apr, it also showed much weaker job growth over the previous 2 months.  Gains for Feb & Mar were revised down by a total of 149K jobs to a respective 248K & 165K.  The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of strong job gains as policymakers try to wrestle inflation under control.  Although the consumer price index has cooled from a peak of 9.1% in Jun, it remains about 3 times higher than the pre-pandemic average.  The stronger-than-expected jobs figure, coupled with a burst in wage growth, could be a worrisome sign for the Fed, which approved a 10th straight interest rate hike yesterday before opening the door to a pause in the tightening cycle.  Job gains were broad-based last month, with the biggest gains in professional & business services (43K), health care (40K) & leisure & hospitality (31K).  Even industries that are more sensitive to higher interest rates, like construction & manufacturing, added workers.  Still, the outlook for the labor market remains hazy.  A spate of bank collapses this spring is threatening to further restrict economic growth & hiring by tightening lending standards & making it more difficult to acquire a loan.  Borrowers may have to agree to more stringent terms like high interest rates as banks try to reduce the financial risk on their end.  Fewer loans, in turn, would lead to less big-ticket spending by consumers & businesses.

US job growth jumps as economy adds 253K new positions

Treasury yields rose as investors digested a hot Apr jobs report & what it means for the economy & Federal Reserve's rate hiking campaign.  The yield on the 10-year Treasury was last up about 9 basis points to 3.448% & the 2-year Treasury jumped 17 basis points to 3.897%.  Yields & prices move in opposite directions.  One basis point equals 0.01%.  The surge in yields came as data from the Bureau of Labor Statistics showed stronger-than-expected jobs growth in Apr even as markets grappled with the banking fallout.  A strong job market will make it less likely for the Federal Reserve to halt its aggressive tightening campaign, a policy shift that manyhad been hoping for.  Despite Fed Chair Jerome Powell suggesting that it was too early to cut rates, investors considered whether the central bank would have to do so later in the year as recession fears spread. Powell also reiterated that any further policy decisions would be data-dependent.

Treasury yields surge after much hotter-than-expected April jobs report

Apple's (AAPL), a Dow stock, financial results came in above estimates in both revenue & EPS as it reported its 2nd qtr.  The tech generated $94.8B in net sales, a 2.5% decline compared to the same 3-month period last year.  The estimates had put revenue at $92.9B, a figure the iPhone maker topped.  On diluted EPS, AAPL also beat expectations.  It was $1.52, 9¢ more than estimates & matching last year's 2nd qtr.  In its iPhone segment, Apple posted $51.3B in quarterly net sales, 1.5% higher from 2022 when it reported $50.6B.  But it was higher than the $48.9B estimate.  Quarterly net sales for services experienced a 5.5% lift, rising from $19.8B to $20.9B.  The estimate called for $20.9B.  AAPL reported generating $7.2B in net sales from its Mac segment.  Last year, it brought in $10.4B.  "We are pleased to report an all-time record in services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high," CEO Tim Cook said.  In addition to its quarterly financial results, the iPhone maker revealed it would do a buyback of "up to $90 billion" shares.  It also unveiled a 4% increase in its div, making it 24¢.  The stock rose 7.90.
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Apple's second-quarter revenue and earnings come in above estimates

Today's stock market was oversold which explains some of its strength.  While the jobs number was good, it came in less than great.  Any strength the data shows complicates the work of the Fed in lowering the inflation rate.  Headwinds remain, starting with the banking crisis which looks to be dragging on.

Dow Jones Industrials

 






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