April’s unemployment data is released at 8:30. Bloomberg reports that the options market says stocks will swing widely after its release as it is expected that it will offer more clarity on how much the Federal Reserve may cut interest rates this year.
Bloomberg writes the options market is expecting the S & P 500 to move 1.2% in either direction after the release.
While the S & P 500 fell 4.2% in April—its worth month showing since at least September—equities have been locked in a tight range.
Bloomberg again writes the benchmark equities index has been remarkably calm, moving 1% or more in either direction during just 17 out of the 84 trading sessions in 2024, while going 300 sessions without closing down at least 2%, its longest stretch since 2018.
Analysts are expecting a 241k and 193k increase in nonfarm and private sector payrolls, respectively, a 3.8% unemployment rate, a 0.3% increase in average hourly earnings, a 34.4 average workweek and a 62.7% labor participation rate (LPR).
Commenting about wages, after a muted second half of 2023, unit labor costs surged 4.7% in the first quarter of 2024, the most in over a year causing a significant slowing in productivity. The BLS stated productivity, or output per hour, rose at an 0.3% annualized rate in the quarter after an upwardly revised 3.5% gain in the prior period.
Productivity is a major tenant of profit margins and inflationary pressures. This is yet another data point suggesting that inflation has become imbedded in the economy and may not decline to the 2% Federal Reserve mandated speed limit without more aggressive monetary policies.
Equites posted moderate gains ahead of AAPL earnings. Treasuries also rallied across the curve.
Speaking of AAPL, the company’s 1Q earnings are being interpreted positively sending shares up about 5.5%, perhaps the result of the massive $110 billion stock repurchase plan.
Last night the foreign markets were up. London was up 0.50%, Paris up 0.62% and Frankfurt up 0.48%. China was down 0.26%, Japan down 0.10% and Hang Seng up 1.48%.
Futures are up about 0.75% should open but this could change radically given the potential significance of the 8:30 data. The 10-year is up 2/32 to yield 4.57%.
ARPIL’S BLS EMPLOYENT REPORT DUE AT 8:30
Kent Engelke
Chief Economic Strategist Managing Director
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