- US job growth was much better than expected last month
- Treasury yields rise as prospects for a July Fed rate cut fade
- Dollar flat, oil recovers, Apple boosts stock indices
SINGAPORE, May 5 (Portal) – A global gauge for equities rallied and US Treasuries and gold sold on Friday as strong US jobs data brightened the economic outlook and traders raised expectations of an easing by the Federal Reserve after a long string of rate hikes steamed
The nonfarm payrolls report showed US employers added 253k jobs in April, up from 165k in March and beating expectations of 180k.
US Treasury yields rose after the report, while the dollar weakened slightly against a basket of major currencies.
Oil prices surged on signs of economic strength but posted their third straight weekly decline. US bank stocks also recouped some losses after a tough week following the collapse of a third major bank.
Ever since Fed Chair Jerome Powell signaled the central bank could pause rate hikes, traders have been betting that would happen at the June meeting, with some even calling for rate cuts in July, according to CME Group’s FedWatch tool. Friday’s data lowered the odds of a July cut.
Still, Friday’s trading suggested the focus was on signs of economic strength rather than the prospects for tighter policies that often come with stronger-than-expected data.
“The pause button has probably been pushed and now the state of the US economy is on the ball and what we’ve seen today suggests it’s in a better position than previously anticipated,” said Kristina Hooper, Chief Global Market Strategist at Invesco, New York. “The caveats are that a data point doesn’t paint a picture and employment is, to a large extent, a lagging indicator of the state of the economy.”
But while decent growth won’t translate into further tightening in the near term, Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute in Charlotte, North Carolina, disagrees with the market’s “Goldilocks scenario,” which sees growth without a hard recession and the Fed slows policy can loosen quickly.
“If the Fed cuts rates aggressively in the second half of the year, something has gone very wrong economically,” he said, adding that the market has a short-term focus for now.
The MSCI measure of equities around the world (.MIWD00000PUS) gained 1.48% and was on course for its biggest one-day percentage gain since January 6. For the week, however, it still showed a small drop.
The Dow Jones Industrial Average (.DJI) was up 546.64 points, or 1.65%, to 33,674.38, the S&P 500 (.SPX) was up 75.03 points, or 1.85%, to 4,136.25 and the Nasdaq Composite (.IXIC) is up 269.02 points, up 2.25% at 12,235.41.
Under the hood, the rebound in oil helped boost the energy stock index (.SPNY). US crude rose 4.05% to $71.34 a barrel and Brent closed at $75.30, up 3.86%.
The biggest single stock rise for all three major US indices came from tech heavyweight Apple Inc (AAPL.O), which surged after its earnings report that impressed investors.
Investors also paused their exit from US banks, sending the KBW Regional Bank Index (.KRX) up 4.7%. However, the regional index was still down nearly 8% on the week after sharp declines in the previous four sessions following the First Republic bank collapse over the weekend.
On the currencies side, the dollar index fell 0.059% while the euro rose 0.05% to $1.1016. The Japanese yen weakened 0.39% against the greenback to 134.84 per dollar, while sterling last traded at $1.2633, up 0.49% on the day.
In Treasuries, the benchmark 10-year bond was up 7.9 basis points to 3.431% from 3.352% late Thursday. The 30-year bond was last up 2.4 basis points to 3.7464%. The 2-year bond was last up 18.7 basis points to 3.9139%.
After nearing a record high in the previous session, gold pulled back quickly after payrolls data dampened expectations for Fed rate cuts.
Spot gold fell 1.7% to $2,017.03 an ounce. US gold futures fell 1.76% to $2,017.40 an ounce.
Editing by Jacqueline Wong
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