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On Thursday, US stocks posted gains, with traders opting to stay out of commitment ahead of Friday’s jobs report.
For the holiday-shortened week, the overall mood remained risk averse, contributing to a decline in weekly performance terms. Recession concerns continued to weigh feeling.
Market participants are concerned that the Federal Reserve’s aggressive rate hike campaign could lead to a cooling off of the economy too quickly, and recent economic data suggests so.
The high-tech Nasdaq Composite (COMP.IND) term up to 0.76% at 12,087.96 points. The benchmark S&P 500 Index (SP500) closed 0.36% higher at 4,105.02 points, while the blue-chip Dow (DJI) added 0.01% to close at 33,485.29 points.
Of the S&P’s 11 sectors, eight finished in the green, led by Communication Services and Utilities. Energy, Materials and Industrials were the three losers.
For the week, the Nasdaq fell 1.10% while the S&P fell 0.10%. The Dow Jones advanced 0.63%.
After weaker-than-expected job openings data and less-than-anticipated private payroll numbers, Thursday’s economic calendar saw the number of Americans filing initial jobless claims drop in the past week.
Focus remains on Friday’s jobs report for more clues on the labor market. The data will undoubtedly play an important role in consolidating expectations of another 25 basis point rate hike by the Fed at its May meeting or no hike at all.
According to the CME FedWatch tool, markets are now pricing in a ~47% probability that there will be no hike at the next meeting of the central bank’s monetary policy committee. The probability of a 25 basis point increase is now around 53%.
“Today was a bit of a dull day as investors await tomorrow’s nonfarm payroll report. The implied chances of another 25 basis point increase this year are only 52%. After that, the market sees four cuts in rates in the remainder of this year. In other words, there is no margin for error. Market participants have factored in a soft landing for the economy and a rapid decline in inflation,” Leo Nelissen of BN Capital told Seeking Alpha.
“If the jobs data is stronger than expected, it could signal sustained inflationary pressures, giving the Federal Reserve an opportunity to further tighten monetary policy. On the other hand, if the jobs data disappoints, it could confirm fears of an economic slowdown, making “A hard landing more likely. In light of this uncertainty, investors are wary of placing significant bets on any outcome, which contributed to the lackluster day in the market,” Nelissen explained.
Treasury yields gained on Thursday, after the previous session’s pullback. The longer-dated 10-year yield (US10Y) rose 2 basis points to 3.31%, while the more rate-sensitive 2-year yield (US2Y) rose 7 basis points to 3.83%.
The bond market closed early today before Good Friday (when the stock market is closed), but will be open until noon on Friday due to the release of the March jobs report.
Among active stocks, Micron Technology (MU) finished among the top percentage gainers in the S&P 500 (SP500) and was on pace to snap a five-day losing streak.
Discount retail giant Costco (COST) fell after reporting a slight decline in March comparable sales.
Lumentum (LITE) slumped after cutting its third-quarter outlook.
