In the morning trading session on Friday, market participants were closely monitoring the movement of June S&P 500 E-Mini futures (ESM24) and June Nasdaq 100 E-Mini futures (NQM24), which showed slight increases of +0.02% and +0.08%, respectively. These movements were observed as investors eagerly awaited the release of the crucial U.S. non-farm payroll data, seeking insights into the potential timing of Federal Reserve interest rate cuts.
In yesterday’s trading session, Wall Street experienced a mixed close, marked by notable fluctuations in individual stocks. Notably, Five Below (FIVE) witnessed a significant decline of over -10% after reporting disappointing Q1 results and revising down its full-year guidance. Similarly, Sprinklr (CXM) tumbled more than -15% following a reduction in its FY25 revenue guidance. ZIM Integrated (ZIM) also experienced a sharp decline, plummeting over -18% after being downgraded by Citigroup. However, Lululemon Athletica (LULU) stood out with a gain of over +4% after reporting better-than-expected Q1 results, raising its full-year EPS guidance, and authorizing a $1 billion increase in its stock repurchase program.
The latest report from the Labor Department indicated that initial jobless claims in the past week increased by +8K to 229K, slightly higher than the expected 220K. Additionally, U.S. Q1 nonfarm productivity rose by +0.2% q/q, just below the consensus of +0.3% q/q, while unit labor costs came in at +4.0% q/q, weaker than the expected +4.7% q/q. The widening of the U.S. trade deficit to -$74.60B in April, marking the largest deficit in 1-1/2 years, also contributed to market sentiment.
Homin Lee, senior macro strategist at Lombard Odier, noted that the U.S. labor market data, including jobless claims and job openings, indicates a gradual rebalancing conducive to further softening in service sector inflation.
Market expectations regarding Federal Reserve rate cuts were reflected in U.S. rate futures, which priced in a 2.3% chance of a 25 basis point rate cut at the Fed’s upcoming monetary policy meeting and a 22.0% probability of a similar cut at the July meeting. However, U.S. rate futures showed a higher likelihood, at 67.2%, of at least a 25 basis point rate cut at the September FOMC meeting.
All eyes were on the eagerly awaited U.S. Nonfarm Payrolls data set to be released later in the day, with economists forecasting May Nonfarm Payrolls to come in at 182K, compared to the previous value of 175K.
A survey conducted by 22V Research revealed a lack of consensus among investors regarding the market reaction to the jobs report. Approximately 36% predicted a “risk-off” move, 33% anticipated a “risk-on” response, and 31% expected a “negligible/mixed” reaction.
In addition to the jobs report, investors were closely watching U.S. Average Hourly Earnings data, with economists expecting May figures to show a +0.3% m/m and +3.9% y/y change compared to the previous month’s +0.2% m/m and +3.9% y/y. The U.S. Unemployment Rate for May was also awaited, with economists forecasting it to remain steady at 3.9%.
Other economic data releases included U.S. Wholesale Inventories for April, U.S. Consumer Credit for April, and German and Eurozone economic indicators. These data points provided further insight into the global economic landscape and influenced market sentiment.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note rose to 4.298%, up by +0.47%.
Meanwhile, in European markets, Euro Stoxx 50 futures showed a decline of -0.51% following the European Central Bank’s decision to cut interest rates for the first time since 2019. Attention shifted to the key monthly U.S. jobs report, with automotive and real estate stocks underperforming while technology stocks gained ground. German economic indicators, including trade surplus, industrial production, and Eurozone GDP data, provided further context for market movements.
Asian stock markets settled mixed, with China’s Shanghai Composite Index closing slightly higher and Japan’s Nikkei 225 Stock Index ending the day slightly lower. Trade data from China revealed a larger-than-expected increase in exports in May, although concerns persisted about potential U.S. actions against Chinese battery makers. Japanese household spending rose for the first time in 14 months in April, but industrial production unexpectedly fell.
Overall, global markets remained cautious ahead of key economic data releases and amid ongoing geopolitical uncertainties, contributing to mixed trading sentiment across regions.