June S&P 500 futures (ESM23) are down -0.21%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.34% this morning as market participants assessed recent labor market data while awaiting the release of U.S. inflation data and the minutes of the Federal Reserve’s latest policy meeting.
The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose by 236K jobs last month, very close to the economists’ estimates of 239K jobs, pointing to persistent tightness in the labor market. Also, the U.S. unemployment rate fell to 3.5% in March from 3.6% in February, stronger than expectations of 3.6%. In addition, U.S. average hourly earnings came in at +0.3% m/m and +4.2% y/y in March, compared to expectations of +0.3% m/m and +4.3% y/y.
“While the headline number of payrolls is still elevated, hours are being cut with the index of aggregate weekly hours falling two months in a row. The employment situation has gone from red hot to merely smoldering,” said Brian Jacobsen, a senior investment strategist at Allspring Global Investments.
After the payrolls report, U.S. rate futures have priced in a 64.0% probability of a 25 basis point rate increase and a 36.0% chance of no hike at the May meeting.
In the coming week, U.S. CPI data for March will be the main highlight as investors look for more clues on the near-term path of interest rates. Also, market participants will be eyeing a spate of economic data, including U.S. Core CPI, Crude Oil Inventories, Federal Budget Balance, Core PPI, PPI, Initial Jobless Claims, Core Retail Sales, Export Price Index, Import Price Index, Retail Sales, Industrial Production, Manufacturing Production, Business Inventories, Michigan Consumer Expectations (preliminary), and Michigan Consumer Sentiment (preliminary).
In addition, investors will be closely watching the release of the Federal Reserve’s minutes from the March meeting for further clues on the outlook for rates and policymakers’ views on the health of the U.S. financial system.
Meanwhile, big banks, including JPMorgan Chase & Co (JPM), Wells Fargo & Company (WFC), and Citigroup (C), kick off the first-quarter earnings season later this week.
The U.S. economic data slate is mainly empty on Monday, but investors could focus on U.S. Wholesale Inventories data. Economists foresee this figure to stand at +0.2% m/m in February, compared to January’s value of -0.3% m/m.
In the bond markets, United States 10-Year rates are at 3.363%, down -0.60%.
U.K. and European markets are closed today to mark Easter Monday.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.37%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.42%.
China’s Shanghai Composite today closed lower as a flare-up in geopolitical tensions around the Taiwan Strait weighed on risk appetite. China announced three days of drills on Saturday after Taiwan President Tsai Ing-wen returned to Taipei following a meeting in Los Angeles with U.S. House of Representatives Speaker Kevin McCarthy. At the same time, investors welcomed the introduction of the new registration-based IPO mechanism in China, with 10 Chinese stocks jumping on their debut. An electronic components distributor, Shenzhen CECport Technologies Co, led gains among the 10 companies trading for the first time under the new IPO process, closing up more than +220% on Monday. Meanwhile, the China Passenger Car Association said Monday that car sales stood at 1.61 million units in March, flat from a year earlier, as price cuts by auto brands and stimulus measures by local governments helped to support demand.
Japan’s Nikkei 225 Stock Index closed higher as the yen weakened following U.S. labor data that showed hiring slowed more than expected but remained steady in March. Meanwhile, shares of Disney Park operator Oriental Land Co rose more than +2% as investors welcomed the ebbing of the COVID-19 pandemic. Investor focus now turns to Kazuo Ueda’s first news conference as Bank of Japan governor later in the day for clues on whether he plans to shift away from ultra-accommodative monetary policy settings. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.37% to 17.30.
“Japanese equities rose on expectations that the U.S. labor market will remain firm,” said Masahiro Ichikawa, a chief market strategist at Sumitomo Mitsui DS Asset Management.
The Japanese February Current Account n.s.a. stood at 2.197T, weaker than expectations of 2.536T.
The Japanese March Household Confidence came in at 33.9, stronger than expectations of 31.9.
Pre-Market U.S. Stock Movers
Pioneer Natural Resources Co (PXD) climbed more than +5% in pre-market trading after the Wall Street Journal reported that Exxon Mobil had held preliminary, informal talks with the U.S. fracking giant about a possible acquisition.
First Republic Bank (FRC) slid more than -1% in pre-market trading after the bank said in a regulatory filing on Friday that it would suspend payments of quarterly cash dividends on its preferred stock.
Block Inc (SQ) fell about -1% in pre-market trading after Keefe Bruyette downgraded the stock to market perform from outperform with a price target of $75, down from $90.
Molecular Templates Inc (MTEM) dropped over -2% in pre-market trading after the company announced a partial clinical hold for the Phase 1 study of MT-0169.
NetApp Inc (NTAP) rose over +1% in pre-market trading after Stifel upgraded the stock to buy from hold.
Ribbon Communications Inc (RBBN) gained over +4% in pre-market trading after JMP Securities initiated coverage on the stock with an outperform rating.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - April 10th
Freedom (FRHC), PriceSmart (PSMT), Tilray (TLRY), Greenbrier (GBX), Riley Exploration Permian (REPX), Skillsoft Corp Class A (SKIL), Lifecore Biomedical (LFCR).
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