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Beyond the Numbers

Upbeat Jobs Data May Lead To Initial Strength On Wall Street
4/5/2021 8:52 AM

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to see initial strength as trading resumes following the long holiday weekend.

The upward momentum on Wall Street comes as traders finally have an opportunity to react to the monthly jobs report, which was released while the markets were closed on Friday.

The closely watched report from the Labor Department showed employment in the U.S. spiked by much more than expected in the month of March.

The Labor Department said non-farm payroll employment surged up by 916,000 jobs in March after climbing by an upwardly revised 468,000 jobs in February.

Economists had expected employment to jump by 647,000 jobs compared to the addition of 379,000 jobs originally reported for the previous month.

The bigger than expected increase in employment reflected widespread job growth, with employment in the leisure and hospitality sector once again leading the way.

The stronger than expected job growth resulted in a continued decrease by the unemployment rate, which fell to 6.0 percent in March from 6.2 percent in February. The drop matched expectations.

With the decrease, the unemployment rate fell to its lowest level since hitting 4.4 percent in March of 2020, when coronavirus lockdowns were just starting to take effect.

Stocks showed a strong move to the upside during trading on Thursday, with technology stocks helping to lead the way higher once again. With the upward move, the S&P 500 ended the session at a new record closing high above 4,000.

The major averages all closed firmly positive, although the tech-heavy Nasdaq posted a particularly strong gain. The Nasdaq soared 233.24 points or 1.8 percent to 13,480.11, while the S&P 500 jumped 46.98 points or 1.2 percent to 4,019.87 and the Dow climbed 171.66 points or 0.5 percent to 33,153.21.

The extended rally by technology stocks, as reflected by the spike by the Nasdaq, was partly in reaction to upbeat news out of the semiconductor sector.

Shares of Micron Technology (MU) surged up by 4.8 percent after the chipmaker reported better than expected fiscal second quarter results and provided upbeat guidance for the current quarter.

Taiwan Semiconductor (TSM) also showed a strong move to the upside after unveiling capacity expansion plans amid rising chip demand.

Tech stocks also benefited from a pullback by treasury yields, with the yield on the benchmark ten-year note moving notably lower after ending the previous session at its highest closing level in over a year.

Positive sentiment was also generated in reaction to a report from the Institute for Supply Management showing the pace of growth in U.S. manufacturing activity accelerated by much more than anticipated in the month of March.

The ISM said its Manufacturing PMI jumped to 64.7 in March from 60.8 in February, with a reading above 50 indicating growth in manufacturing activity. Economists had expected the index to inch up to 61.3.

With the much bigger than expected increase, the Manufacturing PMI reached its highest level since hitting 69.9 in December of 1983.

Meanwhile, the Labor Department released a report showing first-time claims for U.S. unemployment benefits rebounded from their lowest level in a year in the week ended March 27th.

The report said initial jobless claims rose to 719,000, an increase of 61,000 from the previous week's revised level of 658,000.

Economists had expected jobless claims to edge down to 680,000 from the 684,000 originally reported for the previous week.

The downwardly revised number of claims in the previous week was the lowest since the week ended March 14, 2020, just before the start of the coronavirus lockdowns.

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report for March.

Economists currently expect employment to jump by 647,000 jobs in March after climbing by 379,000 jobs in February. The unemployment rate is expected to drop to 6.0 percent from 6.2 percent.

Traders were also reacting to President Joe Biden's speech regarding his $2 trillion infrastructure and economic recovery plan.

Gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 4.4 percent. The rally by gold stocks came as the price of gold extended the rebound seen on Wednesday.

Substantial strength was also visible among semiconductor stocks, as reflected by the 3.7 percent spike by the Philadelphia Semiconductor Index.

Oil stocks also showed a significant move to the upside on the day, with the NYSE Arca Oil Index surging up by 3.3 percent. The strength in the sector came amid a sharp increase by the price of crude oil.

Software, brokerage and commercial real estate stocks also saw considerable strength, moving higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are tumbling $1.16 to $60.29 a barrel after spiking $2.29 to $61.45 a barrel last Thursday. Meanwhile, after climbing $12.80 to $1,728.40 an ounce in the previous session, gold futures are inching up $2 to $1,730.40 an ounce.

On the currency front, the U.S. dollar is trading at 110.45 yen versus the 110.69 yen it fetched last Friday. Against the euro, the dollar is valued at $1.1776 compared to Friday’s $1.1759.

Asia

Asian stocks were mixed in thin holiday trading on Monday as traders reacted to rising Covid-19 cases around the world, signs of firm U.S. growth and rising bond yields.

The dollar held largely steady as last week's strong U.S. employment report, which showed a surge in new jobs in March and slight drop in unemployment, boosted hopes for a faster economic recovery and added to expectations that all the jobs lost during the pandemic could be recovered by the end of next year.

The U.S. manufacturing sector also saw robust growth in March, with a reading on activity in the sector reaching its highest level since December 1983.

Japanese shares advanced as a rise in U.S. bond yields after the release of the U.S. jobs data boosted bank shares. Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial all rose about 3 percent.

The Nikkei 225 Index climbed 235.25 points, or 0.8 percent, to 30,089.25, while the broader Topix closed 0.6 percent higher at 1,983.54.

In the tech space, Advantest rallied 1.9 percent and Screen Holdings gained 1.4 percent. Market heavyweight SoftBank jumped 2.1 percent and Uniqlo operator Fast Retailing advanced 2.4 percent.

Japanese service sector activity extended declines in March as businesses struggled to fully shake off the impact of the coronavirus pandemic, a survey showed earlier today.

South Korea's Kospi edged up 0.3 percent at 3,120.83, extending gains for the third straight session buoyed by U.S. President Joe Biden's $2 trillion infrastructure and economic recovery plan.

Samsung Electronics rose 0.7 percent and SK Hynix climbed 1.4 percent, while LG Chem lost 1.3 percent. LG Electronics tumbled 2.5 percent after the company said it would wind down its loss-making mobile division.

The Australian market was closed on account of Easter Monday. Markets in New Zealand, China, Taiwan and Hong Kong were also closed due to holidays.

Europe

The major European markets are closed on the day in observance of Easter Monday.

U.S. Economic Reports

The Institute for Supply is scheduled to release its report on activity in the service sector in the month of March at 10 am ET.

The ISM’s Services PMI is expected to rise to 58.5 in March from 55.3 in February, with a reading above 50 indicating growth in the sector.

Also at 10 am ET, the Commerce Department is due to release its report on new orders for manufactured goods in the month of February. Factory orders are expected to decrease by 0.5 percent.

Stocks In Focus

Shares of Tesla (TSLA) are seeing significant pre-market strength after the electric car maker revealed that it delivered a record 184,800 vehicles in the first quarter.

Online game platform Roblox (RBLX) may also move to the upside after Goldman Sachs initiated coverage of the company’s stock with a Buy rating.

Meanwhile, shares of GameStop (GME) are moving sharply lower in pre-market trading after the video game retailer announced plans to sell 3.5 million shares of its common stock through an “at-the-market” equity offering program.

Pioneer Natural Resources (PXD) is also seeing pre-market weakness after announcing an agreement to acquire rival shale producer DoublePoint Energy in a transaction valued at approximately $6.4 billion.
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