Stock market today: S&P 500 futures hold near record with June jobs data on deck
07/05/2024 18:10
Investors are looking to the June jobs report for signs of more softening in the labor market that could lay the ground for rate cuts.
US stock futures held near all-time highs on Friday as Wall Street returned from a holiday break, ahead of the key monthly jobs report that will play into Federal Reserve rate-cut calculations.
S&P 500 (ES=F) futures were little changed following a record end to a shortened session Wednesday and Thursday's shutdown for the Fourth of July holiday. Dow Jones Industrial Average futures (YM=F) also clung to the flatline, while those on the tech-heavy Nasdaq 100 (NQ=F) edged up 0.1%.
Investors are bracing for the June jobs report due at 8:30 a.m ET, on the alert for softening in the labor market. The report is expected to show nonfarm payrolls growth slowed to 190,000 rise in June and that the unemployment rate held steady at 4%.
Signs of looser conditions in data earlier this week have bolstered the idea that inflation will keep cooling, setting the stage for the Fed to lower interest rates from their current two-decade high. Traders are now pricing in a nearly 75% chance of a cut in September, according to CME's FedWatch tool.
The key question in Friday's jobs data is whether slowing monthly job growth reflects a normalization in the labor market as it shakes off the pandemic, or the early signs of a broader economic slowdown, Yahoo Finance's Josh Schafer reports.
Elsewhere, the Labour Party's landslide win in UK elections attracted attention from investors monitoring political risk in the US presidential race. As key donors urge President Joe Biden to step aside, eyes are on Donald Trump's growing lead and what that could mean for markets.
Boosted by the AI boom, Samsung Electronics' (005930.KS) quarterly profit surged to 15 times the size of a year ago, lifting the stock to a three-year high.
On the corporate front, crypto-linked stocks Coinbase Global (COIN) and Marathon Digital (MARA) lost around 6% in pre-market trading as bitcoin (BTC-USD) sank to its lowest against the dollar since February.
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S&P 500, Nasdaq notch fresh records
The S&P 500 and Nasdaq notched fresh records in a holiday-shortened trading session on Wall Street.
The S&P 500 (^GSPC) rose about 0.5% to hit a new high of 5,536 after the benchmark ended Tuesday above 5,500 for the first time. The tech-heavy Nasdaq Composite (^IXIC) also moved higher, finishing the day up around 0.9%, while the Dow Jones Industrial Average (^DJI) dropped roughly 0.1%.
The moves come ahead of the stock market's shutdown on Thursday to mark the Independence Day holiday.
Mortgage rates tick higher, ending 4-week slide
It's now a bit more expensive to purchase a home.
Mortgage rates ticked up this week, reversing recent downward trends to officially end a four-week rate slide. The average rate on the 30-year fixed mortgage increased to 6.95% this week, up 6.86% from the week prior, according to Freddie Mac.
Both new home and pending home sales are down, causing active listings to rise.
Freddie Mac said it still expects rates to "moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers."
Mortgage rates tick higher (Source: Freddie Mac) What to watch in June jobs report on Friday
An important data release is set to hit investors early Friday morning after the July Fourth holiday.
Slated for release at 8:30 a.m. ET on Friday, the June jobs report is expected to show further signs of cooling in the labor market.
The report is expected to show nonfarm payrolls rose by 190,000 in May while the unemployment rate remained flat at 4% from the previous month, according to consensus estimates compiled by Bloomberg. In May, the US economy added 272,000 jobs, while the unemployment rate unexpectedly rose to 4%.
Here are the key numbers Wall Street will be looking at compared to the previous month, according to data from Bloomberg:
Nonfarm payrolls: +190,000 vs. +272,000 previously
Unemployment rate: 4% vs. 3.9% previously
Average hourly earnings, month over month: +0.3% vs. +0.4% previously
Average hourly earnings, year over year: +3.9% vs. +4.1% previously
Average weekly hours worked: 34.3 vs. 34.3 previously
The report comes as the stock market has hit record highs amid a slew of softer-than-expected economic data, including readings on inflation that have the US pacing back toward a "disinflationary path," according to Federal Reserve Chair Jerome Powell.
Entering the print markets, investors are pricing in two interest rate cuts this year, with the first most likely to come in September. According to the CME FedWatch Tool, investors are pricing in a nearly 73% chance the Fed cuts rates in September.
The key question in Friday's report and throughout the rest of 2024 remains whether slowing monthly job growth is merely a sign of normalization in the labor market or the early signs of a broader economic slowdown. For now, economists believe Friday's data will favor the latter.
Bank of America US economist Michael Gapen reasoned in a weekly research note that the report will likely show a labor market that is "cooling but not cool."
Still, with unemployment claims rising and the unemployment rate at its highest level in more than two years, House and other economists have noted that the key concern at the moment is that the labor market will keep decelerating to a weaker landing point than the pre-pandemic economy.
"Given the cooling evident over the past year in the labor market, we see further labor market weakening as becoming more worrisome and less welcomed by the Fed," Wells Fargo senior economist Sarah House said.
Wall Street weighs in after Tesla's positive delivery results
Tesla shares (TSLA) rallied again on Wednesday, up more than 5%, after jumping 10% on Tuesday on the heels of better-than-expected quarterly vehicle delivery results.
Yahoo Finance's Ines Ferré has the story:
Tesla this week announced it produced approximately 411,000 vehicles and delivered nearly 444,000 cars during the second quarter, beating consensus estimates and marking an increase from the first quarter.
And despite a year-over-year drop in deliveries, analysts were bullish on the report and pointed to signs the EV industry may be holding up better-than-expected.
"We continue to see scope for improving sentiment in Tesla shares as well as broader EV sentiment as compared with the negative sentiment we have seen over the past ~6 months," Citi analysts wrote in a note following the results on Tuesday.
Dan Ives at Wedbush Securities said in a note the company's deliveries marked a "major turning point" in the "Tesla bull case story."
"The key for Tesla's stock is the Street recognizing that Tesla is the most undervalued AI play in the market," Ives wrote, adding that the "Mojo back for Musk" as he raised his price target on the stock to $300 from $275 with a new bull case of $400 for 2025.
Ives added the company's Robotaxi event on August 8 "will lay the yellow brick road to [full self-driving] and an autonomous future."
Morgan Stanley's Adam Jonas called Tesla's results the "1st Positive Surprise of the Year," noting the automaker delivered 33,000 units more than it produced in the second quarter.
The analyst also highlighted a "show stealer" from its release — Tesla's energy storage business, which posted its highest quarterly deployment yet. The business, which includes utility-scale Megapacks, has been growing faster than the EV segment, with a record profit margin.
"Tesla started its Independence Day celebration early with a positive 2Q delivery beat, 33k lower inventory and a large storage beat to remind investors it's not just an auto company," wrote Jonas.
His team has an Overweight rating on the stock with a $310 price target.
Yields drop, rate cut hopes rise on weak economic data
Yields dropped on Wednesday following weak economic data across both the labor market and services industry, raising hopes that the Federal Reserve will cut interest rates sooner than expected.
The 10-year treastury yield dropped
Weak ISM manufacturing data showed the US services sector contract at the fastest pace in four years during the month of June.
Meanwhile, job creation slowed for a third straight month with the US adding just 150,000 new private sector jobs in June, below the 165,000 Wall Street had expected. Pay gains for both job stayers and job changers also slowed. Investors will be looking ahead to a key June jobs report release on Friday.
Traders are now pricing in 73% odds of a move lower in September, according to CME's FedWatch tool.
Paramount, Skydance deal back on the table: Report
Paramount's (PARA) stock jumped on Wednesday, up about 8% in early trading, after the Wall Street Journal reported the media giant's merger with Skydance Media is supposedly back on the table.
Shari Redstone, who controls Paramount through her family's holding company National Amusements (NAI), ended merger talks with Skydance in June after months of back and forth talks.
Under the new proposed agreement, according to the Journal, Skydance would purchase National Amusements for $1.75 billion and then merge with Paramount, which owns a slew of media assets including CBS, BET, Showtime and MTV, along with its namesake studio business and streaming platform.
The two sides have also agreed to a 45-day "go-shop period," which allows other potential bidders to submit offers.
"It's just a whole lot of uncertainty," Bloomberg Intelligence senior analyst Geetha Ranganathan said of the new deal in an interview with Yahoo Finance, adding the terms are "not very clear at this point."
But what does seem more clear is that Redstone will be protected from the threat of litigation from nonvoting shareholders — a top reason why the media mogul killed the deal last month.
"It looks like, this time around, there is much stronger indemnification language in the agreement that should or could potentially protect her from a lot of the upcoming litigation," Ranganathan said.
But that doesn't mean things are entirely set in stone, especially if history is any indication.
Skydance, which has previously collaborated with Paramount on the production of popular film franchises including "Mission Impossible," "Top Gun: Maverick," and "Transformers," reportedly revised its offer multiple times after nonvoting shareholders expressed concerns over the terms of the initial discussions, which would have given Redstone $2 billion in cash as the first step in the transaction.
The messiness of the negotiations has been an overhang for the company at large. Amid the drama, Paramount announced the departure of CEO Bob Bakish in late April after he was reportedly at odds with Redstone over the Skydance deal. He has since been replaced by an “Office of the CEO” consortium made up of three company division heads.
Wage growth nears three-year low in June as labor market enters 'different regime'
Pay increases for American workers have continued to fall from highs reached during the post-pandemic reopening.
And that's as true for folks keeping the same job as it is for those finding a new gig.
According to new data from ADP released Wednesday, annual wage increases for workers who stayed in their same job increased at the slowest rate in nearly three years in June. For job changers, annual wage increases slid for a third straight month.
"We are in a different regime than we've been in the past where that job-stayer growth was either flat or even rising," ADP chief economist Nela Richardson said during a call with reporters on Wednesday.
"The question before us is just how low is [it] going to get? The idea that job stayer growth would go back to pre-pandemic levels is still being challenged."
In June, wages for job stayers rose 4.9% from the prior year, slower than the 5% pace seen in the prior month and the slowest growth since August 2021. Wages for workers who changed jobs increased 7.7% year over-year, down from 7.8% the month prior and well below the 16.4% seen at its peak in June 2022.
S&P 500, Nasdaq open flat
US stocks traded mostly flat on Wednesday ahead of an early close (1 p.m. ET) to trading and a market shutdown on Thursday.
The S&P 500 (^GSPC) hugged the flatline after the benchmark ended Tuesday above 5,500 for the first time. The tech-heavy Nasdaq Composite (^IXIC) was also little changed, while the Dow Jones Industrial Average (^DJI) edged up 0.2%.
Why Tesla's stock hasn't fallen like a rock in water
Tesla's (TSLA) delivery numbers were bad.
Yet, the stock rallied 10% on Tuesday as the figures were above estimates. The stock is up another 3.5% in the premarket.
Head-scratching!
I think Guggenheim analyst Ron Jewsikow — who continues to be super bearish on Tesla — nicely explains what we are seeing in the Tesla action:
"Looking ahead — production cuts, share losses in China and tariffs in Europe all set a negative backdrop for deliveries in the second half. That said, the prevailing sentiment in our conversations with investors is a lack of desire to be short ahead of the robotaxi event. The focus now shifts to 2Q EPS, full self driving take rate details and the 8/8 robotaxi event."
