The futures markets were lower this morning ahead of the Automatic Data Processing (ADP). Employment Report. Equity futures were hindered by a few lackluster earnings reports after the close yesterday, including from coffee chain Starbucks (SBUX). The Employment Report showed that private payrolls increased by 192,000 in April, beating market expectations. Hiring occurred across most sectors of the economy, with leisure and hospitality adding around 56,000 roles, while construction and health services also contributed to the total. Additionally, pay increased by 5.0% for job stayers, while it increased by 9.3% for those who switched jobs. The market rallied some on the employment figures but the major index futures are still in the red, suggesting a weak start to the trading day. Other data expected in the coming hours includes the Institute for Supply Management’s Manufacturing Survey for April and job openings for March.
Later today, the financial world will be focused on the Federal Reserve Open Market Committee (FOMC) meeting winding up today, news from which could significantly influence stock prices in the days ahead. While it is widely anticipated that interest rates will remain unchanged, traders will be keen to decipher any hints about future interest rate policy. The recent pricing of Treasury bonds suggests one or two interest-rate cuts—25 basis-points each—may transpire by the end of 2024. Investors will be closely monitoring the policy decision release and the subsequent press conference with Federal Reserve Chairman Jerome Powell for any additional insights.
Yesterday, the market experienced a downturn following the release of weaker earnings news from several companies. The major market indexes, including the S&P 500, NASDAQ, and Dow Jones Industrial Average, all trended lower and continued to fall throughout the day, closing not far from their lows. The S&P 500 fell 80 points (down 1.57%), the NASDAQ retreated 325 points (down 2.04%), and the Dow Jones Industrial Average declined 570 points (down 1.49%).
Market breadth was heavily skewed toward decliners, with a 4.7-to-1.0 ratio. Healthcare equities were among the stronger performers, albeit on a relative basis, while energy issues were among the weakest, primarily due to a decline in related commodities and weak performance from Marathon Petroleum (MPC).
In commodity news, oil prices fell throughout the day as traders discounted the geopolitical risk that had been priced in over the past few weeks. Elsewhere, U.S. Treasury bond yields were mixed ahead of the FOMC meeting, with short-term rates rising and long-term ones falling. The Chicago Board Options Exchange Volatility Index, or VIX, also known as the fear index, rose yesterday as traders priced in a higher amount of near-term stock price volatility. The Japanese yen currency moved towards 158 yen per dollar. This currency had reached a 34-year low on Monday, near 160 yen per dollar, before the Bank of Japan stepped in to defend the currency. This move affects the companies with significant operations in Japan.
Several economic reports will be released in the days ahead, including initial jobless claims and U.S. productivity on Thursday. On Friday, the U.S. employment report, hourly wages, and the Institute for Supply Management Services Index will be released. Additionally, a few regional Fed Presidents will give remarks on the economy in the coming days and could provide further clarification to remarks given at today’s FOMC press conference.
Meanwhile, companies releasing quarterly earnings results soon will include Dow-30 components Amgen (AMGN) and Apple (AAPL) on Thursday. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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