Stock Futures Cling to Gains After Disappointing Jobs Report

U.S. stock futures clung to their early gains and government-bond yields declined after disappointing jobs data suggested a potential slowdown in the pace of the economic recovery.

Futures tied to the S&P 500 ticked up 0.3%, a day after the broad-market index closed near its all-time high. Nasdaq-100 futures advanced 1.2%, with gains accelerating after the jobs data was released. Futures linked to the Dow Jones Industrial Average slipped 0.1%, reversing their early rise.

The yield on the 10-year Treasury note edged down to 1.509%, from 1.561% on Thursday, on track for a sixth consecutive day of declines.

The monthly jobs report showed employers added 266,000 jobs in April and the unemployment rose to 6.1%. These figures significantly missed the expectations of economists who estimated that payrolls grew by one million and the unemployment rate fell to 5.8%. It sat at a record 14.8% in April 2020 in the midst of the early stages of the pandemic.

"We were very surprised," said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance, adding that he thinks that the economy will continue to recover, but at a slower pace than expected.

Still, stocks are poised for a second week of muted gains, with sentiment bolstered by Federal Reserve officials reiterating pledges to refrain from tightening monetary policy until the labor market is recovered.

The acceleration in Nasdaq futures in the wake of the data highlights the continued back and forth in the market between technology shares -- which have flourished as interest rates have stayed low and the economy floundered -- and cyclical corners of the market that many investors thought were poised to benefit from a speedy economic recovery. On signs of flagging economic momentum, investors again piled back into the tech-heavy Nasdaq.

JJ Kinahan, chief market strategist at TD Ameritrade, said technology stocks are seeing a "relief rally" after trading lower for much of the week.

"I think there was a big fear going into [today's report] that this number was going to come in so hot and put extreme pressure on the Fed," Mr. Kinahan said. "Many expected it could be...the number that started to take the markets down because it would be such an inflationary number."

He added that Friday's figure, combined with the downward revision in the March jobs number to 770,000, means the Federal Reserve will likely need to see much more substantial progress on the employment situation before considering a change in monetary policy.

"This week was really still a combination of the post-Covid recovery and how interest-rate policy will respond," said Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management. "The performance of some cyclical stocks and commodities suggests that this reopening trade is still on track."

Investors are "trying to gauge the extent to which policy makers are going to keep monetary stimulus in place and whether we're tipping over into the stage where good economic data starts to be a problem for financial markets because it brings forward the time the central banks start very tentatively tightening policy," said Sebastian Mackay, a multiasset fund manager at Invesco. "I think we're getting there."

Earnings season continues, with self-driving truck company Nikola among those reporting Friday.

"We're still in a cyclical upswing, which should drive equities higher on average," Mr. Mackay said. "On average, most of the earnings numbers have been at or above expectations. It is about delivery of those expectations of earnings needed to sustain equities."

Ahead of the opening bell, Peloton rose almost 6% after reporting a smaller quarterly loss than analysts expected and sales that more than doubled. Travel-booking website Expedia added 5% after also reporting a narrower loss than Wall Street forecast. Energy drinks maker Monster Beverage fell over 5% after reporting first-quarter earnings that missed estimates and a shortage of aluminum cans.

In commodities, copper prices surpassed their 2011 highs and were on course to close at a record, fueled by bets on the global economic rebound and on rising demand from efforts to decarbonize the power and transportation sectors. Three-month copper forwards rose 2.4% to $10,355 a metric ton on the London Metal Exchange. In New York, copper futures on CME Group's Comex rose 2.5% to $4.72 a pound.

Overseas, the pan-continental Stoxx Europe 600 climbed 0.5%.

The Shanghai Composite Index pulled back 0.7%, and Japan's Nikkei 225 advanced 0.1%.

Gunjan Banerji contributed to this article.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com


  (END) Dow Jones Newswires
  05-07-21 0934ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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