US stocks wobbled on Friday, after a jobs report seen as pivotal to expectations for interest-rate cuts showed much stronger hiring growth than expected.
The S&P 500 (^GSPC) rose 0.2%, while the Dow Jones Industrial Average (^DJI) gained 0.3%, coming off a lackluster session Thursday for the three major gauges. The tech-heavy Nasdaq Composite (^IXIC) remained in the red, hovering just below the flatline.
Investors have lifted stocks on the expectation that further data would suggest an economic cooldown. But the Labor Department report offered more evidence that parts of the economy are too hot for the central bank’s fight against inflation, feeding into a narrative of keeping rates higher for longer.
The highly anticipated May jobs report reinforced the idea that pulling back rates from their two-decade high likely won’t come until the Fall.
The US economy added 272,000 jobs in May, smashing expectations. However, the unemployment rate did tick higher, rising to 4.0%.
Elsewhere in markets, the wait is also on for a livestream apparently promised by GameStop (GME) booster Keith Gill, aka “Roaring Kitty.” The event, scheduled for noon ET Friday, would be the first live YouTube appearance by Gill since he helped ignite the meme stock rally three years ago.
GameStop shares closed 47% higher on Thursday, but they dropped sharply after the video game retailer said it would sell up to 75 million shares and said sales declined in the first quarter.
Also on deck is the completion of Nvidia’s (NVDA) 10-for-1 stock split, expected after the market closes. A midweek rally briefly vaulted the AI chipmaker to a $3 trillion valuation, but its shares have lost steam as short bets against the company pile up.
The jobs report is a ‘Rorschach blot’ for mixed interpretations
The US labor market added more jobs than expected in May, but the report also contained data for both optimists and pessimists, in what Bill Adams, chief Economist for Comerica Bank, called a Rorschach blot.
Data from the Bureau of Labor Statistics released Friday showed the labor market added 272,000 nonfarm payroll jobs in May, significantly more additions than the 180,000 that was expected.
But the unemployment rate rose to 4% from the prior month’s 3.9% the month prior.
“Optimists about the growth outlook will see solid payrolls growth as a sign the expansion continues unabated,” said Adams, in a note on Friday. “Pessimists will focus on the unemployment rate’s uptick to the highest since early 2022, the increase in part-time employment, and the dip in temporary employment, which is often a leading indicator of broader job market weakness.”
How market observers interpret how the latest jobs figures play into the interest rate outlook can also be interpreted in different ways.
“Most Fed policymakers will see May’s strong payrolls growth and uptick in earnings as a sign that immediate rate cuts are not necessary,” Adams noted. But the Fed will also see the increase in unemployment over the past year as a sign that inflation is on course to moderate further, he added.
“If core inflation continues to slow in the next few months, the Fed will likely feel comfortable beginning to reduce interest rates with a quarter percentage point rate cut at their September meeting.”
Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday.
GameStop (GME): Shares of the video game retailer and meme stock extraordinaire fell 19% in morning Friday after reporting quarterly results that missed analyst estimates and announced a stock sale just hours before a highly anticipated livestream from “Roaring Kitty,” an alias used in the past by bullish retail investor Keith Gill.
DocuSign (DOCU) The software company specializing in electronic agreements shed 8% after reporting second quarter billings guidance that fell below Wall Street expectations. Investors looked past the more positive updates, however, as the company beat earnings estimates and boosted its stock repurchase program by up to a billion of outstanding common stock.
Lyft (LYFT): Shares of the ride hailing company rosed 3% Friday morning, following the company’s decision to revise its growth forecasts upwards and reaffirm its guidance for the second quarter. Lyft now anticipates around 15% growth in bookings over the next three years.
Vail Resorts (MTN) The mountain resort dropped 13% after the company missed earnings expectations and cut its full-year EBITDA outlook. CEO Kirsten Lynch pointed to lift ticket visitation not rebounding in the spring season as a reason for the lowered guidance.
Stocks slide as rate cut expectations fall
The May jobs report, which came in hotter than expected, put another dent in the narrative that the Federal Reserve will soon cut interest rates. The latest reading offered another signal that defed previous signs of a slowdown in the economy.
The S&P 500 (^GSPC) fell 0.3%, while the Dow Jones Industrial Average (^DJI) shed 0.2%, coming off a lackluster session Thursday for the three major gauges. The tech-heavy Nasdaq Composite (^IXIC) dropped around 0.4%.
Eyes on Robinhood
Robinhood (HOOD) remains on several impressive streaks.
For one, the stock price: it’s up 27% in the last 30 days. And two, the flow of news — from debuting a new credit card, to reporting a solid first quarter, to spending $200 million yesterday to buy crypto exchange Bitstamp.
“This is a strategic move by HOOD to expand its crypto business, and we believe validates our thesis that HOOD is a great way to seek crypto equity exposure at the commencement of an exciting new crypto cycle,” said Bernstein’s Gautam Chhugani this morning.
I grabbed coffee with Robinhood’s co-founder and CEO Vlad Tenev yesterday afternoon post Bitstamp deal. The guy has his swagger back, but you can tell he has gained a whole new level of experience having gone through what he did several years back — from layoffs to testifying on the GameStop (GME) insanity. Keep an eye on what the company’s does next in wealth management.
Our last chat on Yahoo Finance Live below.
Reminder as you read the jobs report
The market still wants to believe in rate cuts for 2024.
So keep that in mind as you navigate today’s jobs report and plot through how it may influence Fed policy.
Good point by Deutsche Bank’s Jim Reid this morning after the ECB’s rate cut yesterday:
“And even though the tone was a bit hawkish in several respects, it now makes them the fourth G10 central bank to have cut rates, after Canada, Sweden and Switzerland. In turn, the move has cemented the idea that the global monetary policy cycle is moving towards an easing mode, with investors expecting further cuts on the horizon. So it marks a big shift from much of the last couple of years, when central banks were rapidly hiking rates to try to bring down inflation.”
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