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"Big" -- it is the word of the day because the market is processing some big news. The processing started last night when Apple (AAPL) reported better-than-feared results for its fiscal second quarter and provided better-than-feared revenue guidance for its fiscal third quarter. It did so in conjunction with the news that it is raised its dividend by 4% to $0.25 per share and authorized a big $110 billion share repurchase program.
This big news has sent shares of AAPL up 7.0%, which is no small consideration since Apple is the second-largest company in the S&P 500 in terms of market capitalization. That point has been a big factor for the equity futures market.
The same goes for Amgen (AMGN), which is up 12.4% after its earnings report and positive trial update for its weight loss drug MariTide. That big gain -- and Apple's big gain -- is a major driver of the Dow Jones Industrial Average futures.
The other big news relates to the April employment report. It was big in terms of helping market sentiment.
Nonfarm payrolls increased a smaller-than-expected 175,000, average hourly earnings were up a smaller-than-expected 0.2%, the unemployment rate was up a higher-than-expected 3.9%, and the average workweek was a smaller-than-expected 34.3 hours.
The key takeaway is that this compilation is more than adequate to suggest the economy will remain in a growth mode, which is good for earnings, and plenty suitable to validate Fed Chair Powell's belief that the next policy move by the Fed won't be a rate hike.
On a related note, the fed funds futures market is amped up by the thought that a rate cut might not have to wait until after the September FOMC meeting. The probability of a 25-basis points rate cut to 5.00-5.25% at the July FOMC meeting is at 43.8% now versus 33.9% yesterday, whereas the probability of a 25-basis points rate cut to 5.00-5.25% at the September FOMC meeting is at 74.1% now versus 61.6% yesterday, according to the CME FedWatch Tool.
The equity futures market, which was signaling more modest gains at the open ahead of the report, is now signaling big gains at the open.
Currently, the S&P 500 futures are up 58 points and are trading 1.1% above fair value, the Nasdaq 100 futures are up 273 points and are trading 1.6% above fair value, and the Dow Jones Industrial Average futures are up 490 points and are trading 1.3% above fair value.
The Treasury market's behavior after the report, which is big, has something to do with those indications. The 2-yr note yield, at 4.86% just before the release, is at 4.76%, down 12 basis points. The 10-yr note yield, at 4.55% just before the release, is at 4.48%, down nine basis points.
That's a good base in front of the April ISM Non-Manufacturing PMI (Briefing.com consensus 51.8%; prior 51.4%) at 10:00 a.m. ET.
Notable headlines from the April Employment Situation Report:
- April nonfarm payrolls increased by 175,000 (Briefing.com consensus 250,000). The 3-month average for total nonfarm payrolls decreased to 242,000 from 269,000. March nonfarm payrolls revised to 315,000 from 303,000. February nonfarm payrolls revised to 236,000 from 270,000.
- April private sector payrolls increased by 167,000 (Briefing.com consensus 175,000). March private sector payrolls revised to 243,000 from 232,000. February private sector payrolls revised to 181,000 from 207,000.
- April unemployment rate was 3.9% (Briefing.com consensus 3.8%), versus 3.8% in March. Persons unemployed for 27 weeks or more accounted for 19.6% of the unemployed versus 19.5% in March. The U6 unemployment rate, which accounts for unemployed and underemployed workers, increased to 7.4% from 7.3%.
- April average hourly earnings were up 0.2% (Briefing.com consensus 0.3%) versus 0.3% in March. Over the last 12 months, average hourly earnings have risen 3.9%, versus 4.1% for the 12 months ending in March.
- The average workweek in April was 34.3 hours (Briefing.com consensus 34.4), versus 34.4 hours in March. Manufacturing workweek was unchanged at 40.0 hours. Factory overtime was unchanged at 2.9 hours.
- The labor force participation rate held steady at 62.7%.
- The employment-population ratio dipped to 60.2% from 60.3% in March.
