Stocks jumped Friday, snapping a four-day losing streak as investors cheered a strong jobs report that suggested that the labor market remains strong overall despite some cooling.
The Dow saw its best one-day gain since early January, and surged above 600 points at its highs. Still, both the Dow and S&P 500 fell for the week, and the Nasdaq Composite eked out a small gain.
The labor market heated back up last month as employers added a more-than-expected 253,000 jobs, according to fresh data from the Bureau of Labor Statistics.
The jobs report led investors to believe that “to some degree, the Fed is basically done in terms of tightening policy for the cycle,” said Amanda Agati, chief investment officer for PNC Financial Services Asset Management Group.
Shares of regional banks rose after steep sell-offs earlier this week, fueled by banking turmoil after First Republic’s collapse and subsequent sale to JPMorgan Chase. Shares of PacWest Bank rose roughly 82%, Comerica gained 16.7%, Western Alliance added about 49% and New York Community Bank marched up 7.8%.
Apple shares rose 4.7% after the iPhone maker announced share buybacks on Thursday, also helping lift the broader equity market.
Shares of Lyft tumbled 19.3% after the firm on Thursday forecasted weaker-than-expected revenue for the current quarter.
The Dow rose 547 points, or 1.7%.
The S&P 500 gained 1.9%.
The Nasdaq Composite swelled 2.3%.
As stocks settle after the trading day, levels might still change slightly.
There’s still a chance the economy can avoid a recession — but more rate hikes could be necessary, Federal Reserve Bank of St Louis President James Bullard said Friday.
The Fed’s punishing rate hikes have “stemmed the rise in inflation,” Bullard said at an event hosted by the Economic Club of Minneapolis. But more work needs to be done to bring it down to the central bank’s 2% target, he said. And that could mean another rate increase.
The US economy is expected to slow, Bullard said, but not necessarily fall off a cliff.
“Yes, the economy could go into recession, but that’s not the base case,” he said. “I think the base case is slow growth, probably a somewhat softer labor market and declining inflation.”
Bullard is not a voting member this year in the Fed committee that decides interest rates.
Americans’ credit cards were running hot last month.
Outstanding consumer credit grew by $26.5 billion in April, with two-thirds of that share coming from revolving credit sources (credit card balances), according to data released Friday by the Federal Reserve.
The nearly $17.6 billion increase in revolving credit is the third-largest monthly gain that category has seen since the Fed started keeping track back in 1968.
The monthly Fed credit report doesn’t provide detailed breakouts of how the credit is being used or whether outstanding balances are paid off before interest starts to accrue.
Consumer spending has slowed a little in recent months as persistently high prices and rising interest rates have weighed on household finances, causing debt to grow.
The Dow rose about 583 points, or 1.8%, on Friday after soaring over 600 points at its highs. The blue-chip index is on pace for its best one-day gain since early January.
The S&P 500 gained about 2% and the Nasdaq Composite rose 2.3%.
Still, the Dow and S&P 500 are on pace to end the week down.
Regional bank stocks continued to surge after steep sell-offs earlier this week. Shares of PacWest Bancorp climbed about 84% on Friday, Western Alliance Bank gained about 48.7% and Comerica Bank rose about 17%.
The US Securities and Exchange Commission is investigating First Republic Bank executives’ conduct in the months leading up to the bank’s collapse, according to a Bloomberg report.
Bloomberg, citing two anonymous sources, reported Friday that the SEC is investigating whether First Republic executives traded improperly on inside information.
“The SEC does not comment on the existence or nonexistence of a possible investigation,” a SEC spokesperson told CNN in an email.
First Republic Bank executives sold millions of dollars worth of the company’s stock this year before the bank collapsed earlier this week and was sold to JPMorgan Chase.
JPMorgan Chase did not immediately respond to a request for comment.
Shares of the embattled lender started tumbling in March, when the collapse of Silicon Valley Bank and Signature Bank spurred fears about the banking sector’s stability and steep losses in regional bank stocks.
First Republic failed despite being given lifelines, including $30 billion worth of deposits from big banks including JPMorgan, after the bank in April reported seeing $100 billion worth of deposit outflows during the first quarter.
President Joe Biden on Friday reacted to the latest jobs report, calling it “good news” and part of broader indications that his administration’s economic plan is working.
“This morning, we got some good news from the jobs report. We added 250,000 jobs last month. That’s on top of the 12 million we’ve already added since we came into office a little over two years ago. (The) unemployment rate is at 3.4%, which is the lowest in 50 years. Black employment has hit a record low and the really good news is working age Americans are participating in the labor force at the highest rate in 15 years – not just since the pandemic. In 15 years. And working-age women are participating at the highest rate in 75 years,” Biden said at the top of his Investing in America Cabinet meeting at the White House.
After citing declines in inflation, the president added, “We obviously have more work to do, but we’re trending in the right direction. And I think we’re making real progress. And we’re doing it … by investing in America.”
Sure, the jobs report was hot, but the monthly number is still lower than the average monthly gain over the past year.
Economists have been expecting a continued slowdown in job growth, given the natural course of an employment recovery as well as the effects of the Fed’s interest rates and broader uncertainty around the banking sector.
“This is what a soft landing would look like, with job growth gradually slowing to a more sustainable pace,” said Gus Faucher, senior vice president and chief economist of the PNC Financial Services Group. “That being said, we won’t know whether we’ve achieved a soft landing probably until the end of this year.”
And while a lot can happen and a lot of data will be released — including another jobs report — in the 40 days before the Fed’s next policymaking meeting, today’s hotter-than expected print could influence a more hawkish tilt from the central bank, which is weighing a pause after 10 straight rate hikes.
One day, regional bank stocks are crashing. The next day, they’re going to the moon.
The roller coaster ride for the embattled banking sector continued on Friday, with PacWest skyrocketing by a staggering 82% after losing half its value the day before.
Other regional banks including Key Corp, Comerica and Zions also enjoyed double-digit percentage gains on Friday.
In many ways, these stocks are trading based on fear, rumors and momentum – not fundamentals.
“We believe regional banks are suffering from a GameStop-like moment where misinformation circulating on social media is fueling stock price declines that threaten funding and solvency,” Jaret Seiberg, financial services analyst at TD Cowen Washington Research Group, wrote in a note to clients on Thursday.
The wild trading moves have raised scrutiny on short sellers, who bet against stocks and profit when they fall. Some have accused short sellers of fanning the flames amid the banking crisis.
Western Alliance shares plunged on Thursday after the Financial Times reported that Phoenix-based bank is aiming to sell itself. Western Alliance strongly denied the report and accused the FT of being an “instrument of short sellers” and a “conduit for spreading false narratives.”
White House Press Secretary Karine Jean-Pierre told reporters during Thursday’s press briefing that the administration is “going to closely monitor the market developments, including the short selling pressures…on healthy banks.”
Regulators are also on high alert, with Securities and Exchange Commission Chair Gary Gensler saying in a statement his agency is focused on finding “any form of misconduct” that threatens investors and capital markets.
The Dow Jones Industrial Average soared about 390 points, or about 1.2%, midday Friday as regional bank stocks rallied.
The Dow was up over 400 points at its highs earlier in the session. The S&P 500 rose 1.4% and the Nasdaq Composite gained 1.7%.
Shares of regional bank shares rallied after JPMorgan Chase, which acquired collapsed regional lender First Republic earlier this week, upgraded regional lenders Western Alliance, Zions Bancorp and Comerica Bank to “overweight” ratings.
Shares of PacWest Bank skyrocketed about 78% on Friday after shedding over 50% in the prior session, weighed down by banking turmoil fears after the company said it’s exploring strategic options. Still, the stock is on pace to end the week lower and is down about 75% for the year.
Western Alliance Bank shares jumped 37%, a day after it denied reports that it’s exploring a potential sale. Shares of Zion Bancorp climbed about 18%, KeyCorp rose 10.8% and Comerica Bank gained 17.8%.
Shares of Apple climbed 4.8% after the tech behemoth reported a “March quarter record” for iPhone sales.
Friday’s jobs report showed that average hourly earnings grew in April by 16 cents, or 0.5%, to $33.36, the biggest month-over-month gain since March 2022, though wage growth had cooled since then.
From a year earlier, wages increased 4.4%, up slightly from the prior month, but down from the 5.9% rise in March of last year.
Strong wage growth complicates the Fed’s mission to bring down price increases because higher labor costs feed into inflation.
Similarly, the Employment Cost Index showed that compensation gains picked up in the first quarter. Robust wage figures add to signs that the US labor market is still holding up in the face of high inflation and rising interest rates.
A strong labor market fuels consumer spending.
Warner Bros. Discovery reported its streaming business turned a narrow profit for the first time.
The company, the owner of CNN, said its streaming business posted a $50 million adjusted profit before interest, taxes, depreciation and amortization, compared to a loss of $654 million on that basis a year ago when the results of both Discovery and Warner Media are considered. The two companies closed a merger about one year ago.
The profit came about a year before the company’s earlier guidance predicted: Warner Bros. Discovery had said streaming would be profitable in 2024. But it now expects its US streaming business to post a profit for this year.
“We made a meaningful turn this quarter,” said CEO David Zaslav in a call with investors Friday.
“We’ve turned the corner on our streaming business,” he added. “The key here is our US streaming business is no longer a bleeder. It’s hard to run a business when you have a big bleeder.”
However, the company reported a net loss of $1.1 billion, up from the $299 million combined net loss from the two parts of the company a year ago. Its loss per share came in at 44 cents, compared to forecast of a 1 cent per share profit from analysts surveyed by Refinitiv.
Revenue slipped to $10.7 billion from the combined $11.4 billion reported a year earlier, due largely to a 15% drop in ad revenue and what the company called “disappointing” box office from its movies.
Shares of WBD fell 5% in premarket trading on the news.
To combat high inflation, the Fed is looking to slow down the US economy. In some respects it’s been successful: High interest rates have slowed the housing market and consumers are beginning to rein in their spending.
But the job market remains surprisingly robust. The 253,000 jobs added in April were significantly higher than the 165,000 added in March.
Yes, it’s slower than the average monthly gain in 2023 and much lower than the average 399,000-job monthly gain in 2022 — but it’s still shockingly strong considering the Fed is actively trying to slow growth.
As job growth continues, paychecks have also grown: Average hourly pay rose a robust 4.4% over the past year.
By slowing job growth, businesses and consumers will spend less, which should weigh on prices. Inflation has come down dramatically from a year ago, but it’s still uncomfortably and stubbornly higher than what economists believe is a healthy level.
That means more rate hikes are probably in our future.
Stocks rallied Friday, even as a hot jobs report raised investor concerns that the Federal Reserve will continue to tighten the economy.
Employers added 253,000 jobs in April, according to the Bureau of Labor Statistics. That blew past economists’ expectations of 180,000 jobs, according to Refinitiv, and suggests that the Fed has more room to raise interest rates.
Shares of regional banks rebounded somewhat after steep sell-offs in the previous session, driven by fears that banking turmoil has not been contained after First Republic Bank’s collapse earlier this week.
Shares of PacWest Bank gained 36.8%, Western Alliance ticked up 29.3% and New York Community Bank added 5.6%.
Meanwhile, shares of Apple rose about 3% on Thursday after the iPhone maker reported its second consecutive quarterly revenue decline but announced up to $90 billion in share buybacks.
Lyft shares fell about 17.7% after the firm on Thursday forecasted weaker-than-expected revenue for the current quarter.
Investors are awaiting the consumer credit report for March due at 3 p.m. ET.
The Dow advanced 370 points, or 1.1%.
The S&P 500 swelled about 1.1%.
The Nasdaq Composite marched up 1%.
The Black unemployment rate tumbled to a record low in April for the second month in a row, providing fresh evidence of America’s historic jobs boom.
The Bureau of Labor Statistics said Friday the Black unemployment rate dropped to 4.7% last month, compared with 5% the prior month. That marks the lowest level on records that go back to 1972 and is a sharp drop from 5.7% as recently as February.
The milestone comes just three years after the Covid-19 pandemic caused mass layoffs that pushed the Black unemployment rate as high as 16.8%.
During the Trump administration, the unemployment rate fell to a then-record low of 5.3% in 2019, prior to the health crisis.
The overall US unemployment rate fell to 3.4% in April – tied for the lowest level since May 1969, two months before Neil Armstrong walked on the moon.
The Black unemployment rate of 4.7% compares with 3.1% for Whites, 4.4% for Hispanics and 2.8% for Asians, according to the BLS.
“There’s good news for every audience in this jobs report,” said Nick Bunker, head of economic research at Indeed.
“Workers will be happy that unemployment remains low and those out of work are still able to find jobs quickly. Employers will be pleased that labor force participation continues to grow, particularly for prime-age workers. And policymakers at the Federal Reserve will be comforted by the gradual cooldown in the pace of hiring.”
However, he noted that turmoil in the banking sector could still cause turbulence in the labor market.
“The economy continues to grow its way spectacularly into the history books with the lowest unemployment rate since the 1960s,” said Chris Rupkey, chief economist at FWDBONDS.
“You want a job, it’s yours for the asking.”
Any tightening of credit conditions due to the stresses in the banking sector is clearly not showing up in this labor market, Rupkey said in a note Friday.
“The unemployment rate is back to the lowest in a generation or two, so we promise we will stop pointing at the rise in continuing unemployment claims as a signal that we are doomed and recession is on the way.”
Treasury yields rose Friday after the April jobs report came in stronger than expected, triggering a sell-off. Bond prices move inversely to yields.
The 2-year and 10-year Treasury yields rose but pared back their gains to 3.866% and 3.450%, respectively.
A strong jobs report means that the Federal Reserve has more room to inflict pain on the economy, and increases the likelihood of more rate hikes. The central bank on Wednesday raised rates by a quarter point and opened the door to a pause.
April’s job gains represent a big jump from March’s tally, which was revised down to 165,000 from 236,000 jobs, BLS data shows.
Some of the largest gains were in private education and health services, professional and business services, and leisure and hospitality.
Stock futures rose Friday after the Bureau of Labor Statistics released its April jobs report, which crushed estimates and showed that the US labor market remains robust.
That’s a different reaction than markets had earlier this year to a hot jobs report, since it would cement the path for another rate hike from the Federal Reserve.
However, for the past few weeks, investors have been concerned about instability and contagion in the banking sector, after the failure of three US banks in the last seven weeks.
The April jobs report is now feeding investor confidence in the strength of the US economy. But there’s still no guarantee the Fed won’t stop hiking rates.
Dow futures rose more than 200 points, or 0.6%
S&P futures were 0.7% higher.
Nasdaq Composite futures were up 0.6%.
The labor market heated back up in April as employers added 253,000 jobs, according to data released Friday by the Bureau of Labor Statistics. It’s a surprising increase at a time when many indicators were pointing to cooling employment growth.
Economists were expecting job growth to decline for the third consecutive month and 180,000 jobs to be added, according to Refinitiv.
The unemployment rate fell to 3.4% from 3.5%.
