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Apple (AAPL) is indicated 2.9% lower in the wake of its earnings report. That doesn't sound like a good setup for a positive start for the stock market, but it's really a case of misdirection. Apple is lower, but the broader market is still indicated to open higher.
One offset has been the encouraging headline that China, in its unique way, has suggested it would be open for trade talks with the U.S. The caveat is that it wants the U.S. to demonstrate its sincerity about talking with China by being "...prepared to correct its wrong practices and cancel the unilateral tariffs."
Saying something in this case is better than saying nothing at all, at least as far as the market is concerned, so it has been greeted with a positive response. Another offset was the April employment report, which was better than expected and greased some buying interest that took Amazon.com (AMZN) 1.2% higher in pre-market action after it had been trading nearly 1.0% lower.
Nonfarm payrolls increased by 177,000, the unemployment rate held steady at 4.2% with a pickup in the labor force participation rate, and there was a moderation in wage inflation that the Fed will notice.
The key takeaway from the report is that the employment situation in April remained relatively solid in spite of the volatility associated with the tariff actions and many castigations that they will hurt the economy. It is possible that will prove to be the case, but looking back at April, that wasn't the case in large part for the labor market.
Currently, the S&P 500 futures are up 65 points and are trading 1.1% above fair value, the Nasdaq 100 futures are up 220 points and are trading 1.1% above fair value, and the Dow Jones Industrial Average futures are up 433 points and are trading 1.0% above fair value. The 2-yr note yield is up seven basis points to 3.77%, and the 10-yr note yield is up five basis points to 4.28%.
The fed funds futures market, meanwhile, is pushing out its expectation for the next rate cut from the Fed to the July meeting. According to the CME FedWatch Tool, the probability of a rate cut at the June meeting has dropped to 45.4% from 58.2% yesterday.
Notable headlines from the April Employment Situation Report:
- April nonfarm payrolls increased by 177,000 (Briefing.com consensus 130,000). The 3-month average for total nonfarm payrolls increased to 155,000 from 133,000. March nonfarm payrolls revised to 185,000 from 228,000. February nonfarm payrolls revised to 102,000 from 117,000.
- April private sector payrolls increased by 167,000 (Briefing.com consensus 125,000). March private sector payrolls revised to 170,000 from 209,000. February private sector payrolls revised to 107,000 from 116,000.
- April unemployment rate was 4.2% (Briefing.com consensus 4.2%), versus 4.2% in March. Persons unemployed for 27 weeks or more accounted for 23.5% of the unemployed versus 21.3% in March. The U6 unemployment rate, which accounts for unemployed and underemployed workers, decreased to 7.8% from 7.9%.
- 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 3.8% versus 3.8% for the 12 months ending in March.
- The average workweek in April was 34.3 hours (Briefing.com consensus 34.2), versus an upwardly revised 34.3 hours (from 34.2 hours) in March. Manufacturing workweek was down 0.2 hours to 40.0 hours. Factory overtime was unchanged at 2.9 hours.
- The labor force participation rate increased to 62.6% from 62.5%.
- The employment-population ratio increased to 60.0% from 59.9%.
