Linea Mercati Interview 5/5/23
May 5, 2023
Instant View: Solid April US jobs report undermines case for Fed cut soon
May 5, 2023By Ankika Biswas and Sruthi Shankar
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 4, 2023. REUTERS/Brendan McDermid
May 5 (Reuters) – U.S. stocks were set to open higher on Friday as Apple’s upbeat results underscored resilience in corporate earnings, while a stronger-than-expected jobs report tempered expectations of interest rate cuts from the Federal Reserve.
Apple Inc (AAPL.O) gained 2.7% in premarket trading on better-than-expected results, helped by strong iPhone sales and notable inroads in India and other newer markets.
Investors appeared to take in stride data that showed U.S. employers boosted hiring in April while raising wages, pointing to sustained labor market strength that could prompt the Federal Reserve to keep interest rates higher for some time.
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The Labor Department’s report showed non-farm payrolls increased by 253,000 last month, higher than economists’ expectations of 180,000.
Meanwhile, wages increased 4.4% year-on-year in April after climbing 4.3% in March, and the unemployment rate fell to 3.4%.
“This is a strong report and shows that the labor market is resilient. It bails out the Fed for raising another quarter point,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“It’s been a tough week for the stock market, the regional banking problems have raised the fear factor, but Apple earnings came in strong. Stocks are coming up from near-term oversold condition.”
Traders are currently betting the Fed will start easing the policy rate by September, according to CME Group’s FedWatch Tool, compared with July before the release of the data.
The Fed raised its benchmark interest rate by 25 basis points as expected on Wednesday, but Chair Jerome Powell noted it was too early to say with certainty that the rate-hike cycle was over as inflation remains the chief concern.
Wall Street fell on Thursday after PacWest Bancorp’s (PACW.O) move to explore strategic options deepened concerns about the health of regional banks, pulling down shares of peers and big banks such as JPMorgan Chase (JPM.N) and Wells Fargo & Co (WFC.N).
