Pop before the drop?
Main U.S. indexes gain: DJI out front
Materials leads S&P 500 sector gainers; comm svcs weakest group
Euro STOXX 600 index up ~1.2%
Dollar, bitcoin gain; crude up ~3%; gold down
U.S. 10-Year Treasury yield rises to ~3.66%
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POP BEFORE THE DROP? (1012 EDT/1412 GMT)
U.S. stock indexes opened higher on Friday after data showed a moderation in wage growth in May boosted bets that the Federal Reserve will skip raising interest rates this month, while investors cheered the country averting a debt default.
That said, in the wake of its opening gap higher, the S&P 500 index .SPX jumped more than 1% and hit a high of 4,267.09 about 15 minutes into the session.
With that thrust, the benchmark index nearly tagged weekly Gann Line resistance which now resides around 4,275. The SPX has since backed off slightly and is up around 0.8% on the day.
The Nasdaq .IXIC also jumped more than 1% in early trade and hit 13,252.075, which was its highest level since April 21, 2022. It has also since backed away and is now up just over 0.5%.
Traders will be watching the S&P 500's weekly close vs the Gann Line, as well as the Nasdaq's action throughout the session for signs of an exhausted rise.
Meanwhile, value .IVX is outperforming growth .IGX, With this, growth's four-week winning streak vs value is now at risk.
Here is a snapshot of where markets stood about 40 minutes into the trading day:
(Terence Gabriel)
*****
U.S. STOCK FUTURES HOLD MODEST GAINS AFTER MAY JOBS DATA (0900 EDT/1300 GMT)
U.S. equity index futures are modestly green in the wake of the release of the latest data on U.S. employment.
The May non-farm payroll headline jobs number came in at 339k, which was well above the 190k estimate. The unemployment rate was 3.7% vs a 3.5% estimate. Wage data, on a month-over-month basis was in-line with the estimate. On a year-over-year basis, it was cooler than expected:
According to the CME's FedWatch Tool FEDWTACH, the probability that the Fed sits on its hands and leaves rates unchanged at its June meeting is now around 63% from 74% just prior to the data coming out. The chance of a 25 point rate hike is now 37% from 26% just before the numbers were released.
E-mini S&P 500 futures EScv1 are higher, gaining around 0.5%. In the wake of the Senate passing a bill late on Thursday to lift the government's $31.4 trillion debt ceiling, avoiding a catastrophic, first-ever default, the futures were up around 0.4% just before the numbers came out.
A majority of S&P 500 sector SPDR ETFs are higher in premarket trade, with energy XLE.P, up around 1.5%, showing the biggest gain. Communication services XLC.P is the weakest group, off about 0.6%.
The SPDR S&P regional banking ETF KRE.P is up around 1.4%.
Regarding the jobs data, Art Hogan, chief market strategist at B Riley Wealth, said:
"The average hourly earnings, which is probably the more important piece of information which was estimated to be at 4.4%, came in at 4.3%. The Fed pays more attention to that particular line in the report then they do to the headline number."
With this Hogan noted that the unemployment rate surprisingly moved higher in what is the first significant bump up and something that the market has been waiting for.
Hogan added "This is a reflection of a labor market that while still robust, is softening gently, not rapidly. That's exactly what the Fed would like to see. The Fed wants to tame inflation without crushing the jobs market, and this is another piece of evidence that they're actually well along their way to getting that accomplished."
Hogan thinks the Fed has enough evidence in hand to take a pass at the next meeting and remain data dependent for the July meeting.
Here is a premarket snapshot just shortly before 0900 EDT:
(Terence Gabriel, Shristi Achar)
*****
FOR FRIDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
LMNFP06022023 https://tmsnrt.rs/3IOm1hG
premarket0602023 https://tmsnrt.rs/3qpocBX
earlytrade06022023 https://tmsnrt.rs/43ESdvS
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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