Sentiment on Wall Street is turning sour at the end of the week. The ADP employment report shook market optimism yesterday. So, the market awaited the official nonfarm payrolls in a gloomy mood.
As expected, the benchmark stock indices traded in the red yesterday. Resilient stocks of high-tech giants cushioned the fall. The Dow Jones lost 366 points or 1.07%. The Nasdaq closed 0.82% down. The S&P 500 shed 25 points to close at 4,411.
The major stock indices traded sluggishly in the pre-market awaiting the publication of the employment report. The S&P 500 is expected to trade in the intraday corridor between 4,370 and 4,440.
The stock indices went sharply down amid a massive sell-off in light of the ADP report which proved robust employment. Besides, rising yields of US Treasuries fueled fears about further aggressive monetary tightening by the US Fed.
The ADP payroll processor reported stronger-than-expected growth in the private sector’s employment. It proves the resilience of the labor market despite mounting recession fears. The JOLTs jobs openings report showed that vacancies in the US contracted in May but remained at an elevated level.
Released a day before the government data, the ADP report showed no changes in the labor market. In fact, the US Fed does not have to worry about employment and has enough leverage to raise rates further.
Yields of 10-year benchmark Treasuries climbed 4% whereas yields of 2-year Treasuries which commonly reflect interest rates expectations rose to the 16-year high in light of the reports.
All 11 sectors of the S&P 500 closed in the red. Energy was the biggest loser, falling by about 2.5%, while consumer goods dropped by nearly 1.7%.
The rise in mega-capital stocks cushioned the decline in the major indices, helping them retreat from session lows. Microsoft shares rose by 0.9% and Apple shares grew by 0.3%. The S&P 500 and the Dow, however, posted their biggest daily percentage drops since May 23 and May 2, respectively.
Among individual stocks, Exxon Mobil tumbled by 3.7% after the oil major reported a sharp drop in second-quarter operating profit due to lower natural gas prices and lower refining margins.
Shares of JetBlue Airways plunged by 7.2% on the day after the company said it would follow a US judge’s May ruling to end its partnership with American Airlines to defend its planned purchase of Spirit Airlines.
Futures for US stock indices traded quietly on Friday before the release of employment data. On the one hand, the latter gave the market a slight relief, on the other hand, they sent an alarming bell.In June, the US economy added 209,000 jobs, after 306,000 in May. The figure undershot the market forecast of 225,000 jobs and is the lowest since December 2020.
At the same time, the indicator is still more than twice bigger than the 70-100 thousand jobs per month needed to support the growth of the working-age population. In the first 6 months, non-farm payrolls grew by an average of 278,000 per month, below the average of 399,000 per month in 2022.The US unemployment rate eased slightly to 3.6% in June 2023, below May’s seven-month high of 3.7% and in line with market expectations.
The so-called U-6 unemployment rate, which includes people who want to work but have stopped looking and those who work part-time because they can’t find a full-time job, rose to 6.9% in June from 6.7% in May.
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00:00 INTRO
00:26 S&P500
01:00 QUOTES
02:11 USD
03:43 US NONFARM PAYROLLS (JUNE)
04:35 US UNEMPLOYMENT RATE (JUNE)
05:33 US AVERAGE HOURLY EARNINGS, M/M (JUNE)
08:14 USDX
09:55 USD | CAD
10:14 CANADA UNEMPLOYMENT RATE (JUNE)
11:39 OIL
11:52 BTC | USD
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