The U.S. non-farm employment data for April significantly underperformed expectations, leading to a rise in the unemployment rate and a slowdown in wage increases, suggesting a cooling labor market following strong growth at the start of the year.
Employers in the U.S. cut back on hiring in April, as shown by data released by the Bureau of Labor Statistics on Friday, resulting in an unexpected rise in the unemployment rate and a slowdown in wage growth. The seasonally adjusted non-farm employment rose by 175,000, the lowest increase since October 2023 and below the expected 243,000 and previous 303,000.
The unemployment rate unexpectedly rose to 3.9%, with expectations to remain unchanged at 3.8%; average hourly earnings in April grew by 0.2% month-over-month, below the expected and previous figure of 0.3%.
Regarding revisions to past data, February's non-farm job additions were revised down from 270,000 to 236,000; March's were revised up from 303,000 to 315,000.
After these revisions, the total job additions for February and March were 22,000 less than before.
By the close of trading on Friday, the S&P 500 index was up 1.26% or 63.59 points, ending at 5127.79 points; the Dow Jones increased by 1.18% or 450.02 points, closing at 38675.68 points; the Nasdaq nearly rose 2% or 315.37 points, finishing at 16156.33 points.
This week, the S&P 500 rose 0.55%; the Dow increased by 1.14%; the Nasdaq grew by 1.43%, marking the second consecutive week of gains for all three major indices.
In terms of individual stocks, after Apple Inc. reported a slowdown in last quarter’s revenue decline in Greater China and projected a return to revenue growth for this quarter, initiating the largest-ever $110 billion buyback and a 4% dividend increase, its stock temporarily surged over 8%.
The semiconductor index closed up over 2% for the week, despite a drop. Nvidia rose 3.5%, Qualcomm surged then fell back the next day, and AMD's financial week saw a drop of over 4%; the energy sector fell more than 3% for the week; the Chinese stocks index rose 1.7%, achieving a six-month high with three consecutive gains, as NetEase climbed over 4%, while Xpeng and Li Auto fell over 3%.
U.S. Treasury yields declined on Friday, with the 10-year yield dropping 7.1 basis points to 4.50%, having briefly fallen to 4.453% earlier in the day.
Following the latest job data, U.S. interest rate futures currently imply two Fed rate cuts of 25 basis points in 2024, up from one cut expected before the non-farm data. Traders now anticipate the Fed's first rate cut from November to September.
However, Ali Jaffery, an analyst at CIBC, warned that markets should not become complacent, as Federal Reserve policymakers need to see more than just one month of good data to feel more confident about inflation pressures driven by the labor market. Ultimately, the Fed will hold off on any action until they have a clear understanding of inflation.
On Wednesday, the Fed policy meeting announced that the benchmark interest rate would remain at its highest point in over 20 years.
During the subsequent press conference, Fed Chairman Jerome Powell stated that the data so far this year has not given the committee “greater confidence” that inflation will move sustainably towards 2%, but he seemed to rule out a rate hike as the next possible step by the central bank.
In the currency market, the U.S. dollar weakened due to the dovish Fed stance and sliding U.S. bond yields, with the dollar index quickly expanding its losses after the employment report, erasing all gains since the unexpected acceleration of the U.S. Consumer Price Index (CPI) in March, dropping to a low of over three weeks.
Citibank noted that this week's catalyst did not trigger further interest rate volatility/hawkish Fed pricing, which limited the movements of the U.S. dollar and bond yields. The below-expected labor market report bolstered this view, and we expect the crowded U.S. dollar long positions to be vulnerable.
The euro/U.S. dollar maintained a firm tone, extending its gains for a third consecutive day.
Notably, this week, USD/JPY experienced significant fluctuations, at one point breaking below the 160 psychological barrier. After intervention by Japanese authorities, the yen rebounded and managed to recover 152 during the session on Friday, rebounding over 1% from the day's low, potentially marking the best weekly performance in over a year.
Furthermore, the offshore Chinese yuan surged over 400 points on Thursday, breaking above 7.17 during the session for the first time since January.
The Canadian dollar was influenced by various factors, including poor U.S. economic data, weakening oil prices, and market expectations for a Bank of Canada rate cut, leading to a decline against all major currencies.
In the precious metals market, the gold market is in a stalemate, likely leading to profit-taking by investors and short-term pressure on gold prices, expected to test the support level near $2300/ounce this week.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, commented: “Gold bulls seem a bit tired now; they need the Federal Reserve to provide clear messages about its monetary policy.”
In the oil market, oil prices declined, marking the largest single-week drop in three months, as investors weighed weak U.S. employment data and potential Fed rate cut timing.
WTI crude for June delivery fell $0.84/barrel, a decline of 1.06%, closing at $78.11/barrel for the week, accumulating a 6.84% drop.
Brent crude for July delivery fell $0.71/barrel, approximately 0.85%, closing at $82.96/barrel, with a weekly total drop of 5.95%.
As Israel and Hamas considered a temporary ceasefire and held talks with international mediators due to the ongoing war, the geopolitical risk premium has diminished.
Looking ahead, the next OPEC+ meeting is scheduled for June 1. According to three sources, if oil demand does not increase, OPEC+ may extend the voluntary oil production cut beyond June.
Bitcoin's price continued its rebound in May. Since the Fed announced it would "hold its ground," the sell-off post-Bitcoin halving has stalled, laying the groundwork for a mild recovery phase.
On Friday, Bitcoin rose 8%, briefly breaking above $62,000, rebounding more than $3,000 from Wednesday's low of below $57,000, marking the lowest point in two months.
Cheng Yuan
Beincrypto
Coindesk
Finbold
Bitcoinist