Wall Street traders remained unwilling to commit to any substantial moves ahead of Friday’s jobs report, with stocks edging higher in a choppy session, bonds getting bid up again and the dollar barely budging.
(Bloomberg) — Wall Street traders remained unwilling to commit to any substantial moves ahead of Friday’s jobs report, with stocks edging higher in a choppy session, bonds getting bid up again and the dollar barely budging.
Gains in some big-tech names drove a rebound in equities, which also got a respite after Federal Reserve Bank of St. Louis President James Bullard said the recent sharp drop in yields will ease headwinds stemming from the banking turmoil. However, uncertainties on whether the payrolls data will show inflation is cooling or fuel more worries about a recession continued to keep a lid on the market.
As investors have aggressively priced in rate cuts this year, a “too hot” payrolls number would undermine those expectations, while a “too cold” report would add to worries about a hard landing, according to Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.
“Bottom line, there are two-sided risks to this jobs report for the first time in a long time, and to hold the recent rally we will need a ‘just right’ number, otherwise we should prepare for more volatility,” Essaye noted.
In the run-up to the jobs data, the tech-heavy Nasdaq 100 outperformed other benchmarks, with giants Apple Inc. and Microsoft Corp. climbing. Defensive industries, such as utility, health-care and communication services, also gained. Treasury 10-year yields dropped for a seventh consecutive session, trading near 3.3%. The dollar fluctuated.
Adam Crisafulli at Vital Knowledge says the “fairly directionless session” is partly due to fundamental uncertainty, but also to the calendar — as investors head into a long weekend that will bring a major jobs report just a week away from the critical earnings season.
97% Chance
Data Thursday showed applications for US unemployment benefits signaling the labor market still remains relatively strong, even though revisions indicated some emerging signs of softening. The figures precede Friday’s jobs report, which is expected to show another strong month of hiring in March and the unemployment rate holding near a historic low.
“Jobless claims this morning came in a little higher than expected and that lends credence to the idea that the Fed’s rate hikes are beginning to cool down the labor market and slow down the economy,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “No one knows what it will take to bring inflation back down to the 2% target, but the odds are much higher that it will cause a recession – and even a significant recession – than most people are currently willing to believe.”
Bloomberg Economics’ recession-probability model, which relies on 13 indicators, sees a 97% chance of recession occurring as soon as July, up from 76% in the previous update – and that’s even before factoring in fallout from the banking crisis and oil-price shock. The 12-month-ahead recession probability remains at 100%.
“With recent banking turmoil raising uncertainty, oil prices spiking and the full impact of past monetary tightening yet to hit the economy, it will be hard to avoid a recession this year,” wrote analysts Eliza Winger and Anna Wong.
The International Monetary Fund warned that its outlook for global economic growth over the next five years is the weakest in more than three decades, urging nations to avoid economic fragmentation caused by geopolitical tension and take steps to bolster productivity.
Money Market
Investors, shaken by the ongoing turmoil in the banking industry and seeking higher yields, are racing into money-market funds.
More than $300 billion flowed into those products in the three weeks ending March 29, according to the Investment Company Institute. That pushed assets to a record $5.2 trillion, topping the $4.8 trillion pandemic peak
As traders parse economic data for signs of a slowdown, the upcoming earnings season will have added significance. It officially kicks off on April 14 when large US lenders including JPMorgan Chase & Co. and Citigroup Inc. report results.
Analyst consensus expectations are for S&P 500 earnings-per-share to fall 7% in the first quarter from a year earlier, marking the sharpest decline since the third quarter of 2020 and a low point in the profit cycle, Goldman Sachs Group Inc. strategists including Lily Calcagnini and David Kostin wrote in a note.
“If analyst projections are realized, this quarter will represent the trough in S&P 500 earnings growth,” they wrote.
Read: Banks In Focus as Deposits Scrutinized: US Earnings Week Ahead
Key events this week:
- US unemployment, nonfarm payrolls, Friday
- Good Friday. US stock markets closed, bond markets close for part of the day
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 12:07 p.m. New York time
- The Nasdaq 100 rose 0.5%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0931
- The British pound was little changed at $1.2458
- The Japanese yen fell 0.3% to 131.65 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $28,113.61
- Ether fell 1.7% to $1,874.05
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.28%
- Germany’s 10-year yield was little changed at 2.18%
- Britain’s 10-year yield was little changed at 3.43%
Commodities
- West Texas Intermediate crude fell 0.2% to $80.47 a barrel
- Gold futures fell 0.4% to $2,028.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Srinivasan Sivabalan, Isabelle Lee and Carly Wanna.
More stories like this are available on bloomberg.com
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