OPENING CALL
Apple earnings weren't as bad as expected-and that has put investors in a positive frame of mind heading into Friday's big jobs report.
The payrolls data, due at 8:30 a.m. ET, is expected to show employers added 240,000 jobs in April, a slowdown from a strong March readout.
The robust labor market and persistent inflationary pressures have forced investors to rethink expectations for interest-rate cuts from the Federal Reserve.
Wednesday's Fed meeting offered little clarity on the timeline for policy easing, with Jerome Powell emphasizing that "data will have to answer that question for us."
In recent trading:
-Stock futures rose
-Treasury yields slipped
-The dollar weakened. The yen climbed against the greenback, bringing its gain for the week to 3%, after the Japanese finance ministry intervened to boost its value.
-Overseas stocks were mostly higher. European indexes edged up, while Hong Kong's Hang Seng Index climbed 1.5%. Japanese markets were closed for a holiday.
Other Premarket Movers
Amgen stock rose 13% after it said it was "very encouraged" by an interim analysis of a Phase 2 study of injectable weight-loss drug MariTide.
Booking Holdings posted first-quarter adjusted profit that topped analysts' expectations. Shares rose 1.9%.
Coinbase shares fell 2.9% after it said it expects second-quarter "technology [and] development and general and administrative expenses to be $660-$710 million."
DraftKings rose 1.8% after it reported adjusted earnings in the first quarter of 3 cents a share, compare with a loss of 17 cents expected by Wall Street.
Expedia was down 9.5% after it reduced its sales outlook for the year to a range of mid- to high-single-digit top-line growth, saying that efforts to recharge vacation-rental site Vrbo have progressed more slowly than expected.
Fortinet shares fell 6.6% as first-quarter billings declined 6% from a year earlier to $1.41 billion, missing estimates of $1.43 billion.
Postmarket Movers
Lockheed Martin said it had withdrawn its nearly $300 million bid to acquire Terran Orbital. Shares fell 18%.
Watch For:
Employment Report for April
Today's Headlines/Must Reads:
- Apple Buys Itself Some Time for an AI Boost
- iPhone's Steady Evolution Is Costing Apple in China
- Geopolitics Takes a Central Role in Supply Chains
- Just How Strong Is U.S. Manufacturing? Trucks and Fuel Send a Troubling Message
- Boeing's Latest Trouble Is a Jet Part Caught Up in Russia Sanctions
MARKET WRAPS
Forex:
ING said weaker jobs data could cause the dollar to extend falls, after it hit a three-week low against a basket of currencies.
"We do not expect today's data to dent the bearish dollar momentum as markets may fully price in a cut in September and keep short-term dollar rates capped," ING said.
It noted that despite recent strong payrolls data, U.S. business surveys suggest "substantial slowing" in employment.
Bonds:
SEB Research said Treasury yields are expected to be driven primarily by market expectations of Federal Reserve interest rates on the back of upcoming data and Fed policymakers' comments in the coming months, with no surprise in the Treasury's quarterly refunding plan.
The Treasury left the issuance of longer-term debt unchanged for May-July, and also said it doesn't anticipate an increase to the nominal coupon auction-a reference to note and bond issuance-or floating rate auction sizes for at least several quarters.
Saxo said the two-year Treasury yield is expected to fluctuate between 4.75% and 5% until clarity emerges regarding potential interest-rate cuts by the Federal Reserve, while long-term yields may continue to climb.
Drivers behind higher long-term yields are increased term premium and elevated coupon [note and bond] issuance, Saxo said.
"With rising inflation risks and market uncertainty, investors are likely to demand higher premiums to hold U.S. Treasuries, exerting upward pressure on the long end of the yield curve."
Saxo said the long end of the yield curve remains susceptible to higher yields, adding that the 10-year yield reaching 5% before quarter-end cannot be ruled out.
Russell Investments said investors may wish to consider lengthening out the duration of their bond portfolios as the recession risks haven't fully gone in the U.S..
"While the word 'recession' may have slipped from the market's vocabulary, we don't think recession risks have fully abated," Russell Investments said, still seeing a 35% probability of a recession in the U.S. over the next 12 months.
"If the U.S. economy tips into a recession, the Fed would need to respond by aggressively cutting interest rates, which would benefit bondholders."
TwentyFour Asset Management said volatility in bond markets might decline in the coming weeks as the Federal Reserve's meeting and the Treasury's quarterly refunding announcements are now out of the way.
Lower volatility could allow Treasurys, Bunds, Gilts and other G-7 government bonds to trade sideways until a new catalyst emerges.
"After an 80 basis points selloff in 10-year Treasuries, further outsized moves require a continuous dose of increasingly bad news."
Energy:
Oil inched higher as traders assess the geopolitical and macroeconomic backdrop after a bearish week for the commodity.
Still, the benchmarks are on course for another weekly loss as renewed hopes for a deal between Israel and Hamas, a weekly build in U.S. crude inventories and the prospect of higher-for-longer interest rates weigh on sentiment.
OPEC+
OPEC and its allies are likely to extend their voluntary production cuts beyond the second quarter at their upcoming meeting in June, according to JPMorgan.
"While several key indicators tracked by OPEC suggest relatively strong fundamentals, a large counter-seasonal build in visible oil inventories in April is a concern and at odds with our forecast of only 0.1 million barrels a day surplus."
JPM keeps its oil price forecast unchanged, with Brent crude at an average of $88 a barrel from May to September.
Metals:
Gold was flat and may have retreated somewhat from its April record highs, but it should still appreciate to around $2,700 an ounce by the end of the year in a base case scenario, Goldman Sachs said.
Central banks and Asian household spending continue to drive demand, and interest rates--which negatively affect sentiment toward non-interest bearing bullion--should lower over the year, Goldman Sachs said.
Central banks have stocked up since mid-2022, with global gold purchases tripling since Russia's invasion of Ukraine, and new geopolitical or financial shocks may push prices higher, Goldman Sachs said.
TODAY'S TOP HEADLINES
HSBC's Green Credentials Come Under Fresh Scrutiny
HSBC's green credentials are under fresh scrutiny, with activist shareholders pressing the Asia-focused bank to clarify plans to spend up to $1 trillion on sustainable finance in the coming years.
The investor group, which has $892 billion in assets under management, said Friday that it intends to ask the bank at its annual general meeting to explain how it will spend its green funds. It also wants the bank to set a funding target for renewable energy.
Eurozone Jobless Rate Remains at Record Low
The eurozone's unemployment level held steady at a record low in March, a sign of the robustness of the bloc's jobs market that might keep European Central Bank policymakers on their toes amid concerns over sticky wage growth.
Joblessness stood at 6.5% in the 20-member bloc, according to figures published Friday by European Union statistics agency Eurostat, the same as in every month since November and matching a consensus of economists polled by The Wall Street Journal.
New EU Cyber Rules for Electricity Providers Aim to Prevent Cascading Outages
Electricity providers in Europe will soon have to perform cybersecurity risk assessments for regulators, including disclosing incidents, reporting threats and implementing safeguards, under coming rules that aim to prevent hacks from causing blackouts in multiple countries.
The new rules are expected to take effect as soon as lawmakers approve them, which could come as soon as next week. The European Commission, the executive body of the European Union, approved the legislation in March.
Battery Energy Needs to Be Stored. China Is at the Forefront.
Most roads in the green energy transition lead through China. The latest is no exception.
Environment ministers from the G-7 Western economies have targeted a sixfold increase in storage for renewable energy by 2030. Most of that will come from battery energy storage systems, BESS for short, which can hold solar- or wind-generated power, then release it when the sun doesn't shine or the wind stops blowing.
Renewable Energy Stocks Are Finally Riding the AI Wave
The data centers running artificial intelligence applications consume enormous amounts of power. As AI has become the biggest investment theme of 2024, several energy stocks that provide that electricity have been soaring. But renewable energy stocks have missed the party-until this week.
On Wednesday, Brookfield Asset Management announced a deal with Microsoft to build renewable energy projects with the capacity to produce 10.5 gigawatts of electricity in Europe and the U.S. between 2026 and 2030. The deal is nearly eight times as large as the next-biggest renewable power contract ever signed, according to Brookfield.
Private-Equity Woes Spell Opportunity for Credit-Focused Ares
Private-credit specialist Ares Management sees opportunities to help buyout shops shore up the companies they back against higher interest rates while providing cash back to their funds' investors without having to sell the underlying assets, firm leaders said Thursday.
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05-03-24 0607ET
