U.S. stocks rallied Friday, following a weaker-than-expected jobs report, which supports the case for the Federal Reserve to ease interest rates in the near future, amid fears that the U.S. economy is decelerating as trade tensions between the U.S. and counterparts Mexico and China persist.
The Dow Jones Industrial Average DJIA, +1.20% rose 271 points, or 1.1% , at 25,997, while those for the S&P 500 index SPX, +1.31% gained 33 points, or 1.2%, at 2,876, and the Nasdaq Composite index COMP, +1.84% advanced 119 points to 7,734, a gain of 1.6%.
On Thursday, the Dow rose 181.10 points, or 0.7%, at 25,720.66, representing its longest string of gains since March 18, according to Dow Jones Market Data. The S&P meanwhile, rose 17.34 points, or 0.6% to 2,843.49, while the Nasdaq added 40.08 points, or 0.5%, to reach 7,615.55.
For the week, the Dow is set to gain 4.8%, the S&P 500 looks likely to return 4.6%, while the Nasdaq was set for a weekly climb of 3.8%. If these levels hold it would mark the best performance since the week ended Nov. 30, according to FactSet data.
The U.S. economy added 75,000 new jobs in May, while the unemployment rate held steady at 3.6%, the Labor Department said Friday, below the 185,000 estimated by economists, per a MarketWatch poll. Estimated job gains for both March and April were revised down by a total 75,000, and the three-month moving average of monthly job gains has fallen from 245,000 in January to 151,000 today.
The jobs report follows the smallest increase in private-sector employment in nine years, according to payment processor ADP on Wednesday, which showed that the private sector added 27,000 nonfarm jobs in May, representing the weakest growth since March 2010.
While stock index-futures initially sold off on the news, markets could be entering a period in which bad economic news is good for stock markets, analysts said, as it would increase the chances that the Federal Reserve would move to lower interest rates in the coming months.
Wall Street is increasingly anticipating a reduction of borrowing costs by the Federal Reserve to combat sluggish inflation and the aftershocks of intensifying trade wars between the U.S. and counterparts, including Mexico and China. The market is placing a 25% chance of a rate cut at the Fed’s coming policy-setting meeting June 18-19, according to CME Group data.
On the trade front, several newsreports suggested the U.S. and Mexico made progress Thursday on a deal that would have Mexico agree to steps to slow the flow of migrants from Central America to the United States, in return for the U.S. declining to impose tariffs on Mexican imports.
Mexico has also emphasized the need for more U.S. economic aid to potentially subsidize Mexican interdiction efforts, and to support economic development in migrants’ home countries. It remains to be seen, however, whether a deal can be reached in time to avoid the imposition of a 5% tariff on all Mexican imports, set to go into effect Monday. Talks are set to resume Friday.
There is less reason for optimism that the U.S.-China trade dispute will be resolved any time soon, with no new scheduled talks between the two powers. Early Friday, the Governor of the People’s Bank of China told Bloomberg that the central bank has “tremendous” room to use monetary policy to stimulate the Chinese economy, should the Sino-American trade spat worsen.
Wholesale inventories rose 0.8%, the Commerce Department said Friday, above the 0.3% consensus expectation, according to Econoday.
A report on consumer credit growth will be released at 3 p.m.
“This is the type of [jobs report] the doves will really take to, as it supports the argument for cutting rates beyond politics or trade issues, which were never part of the Fed’s mandate to begin with,” Mike Loewengart, vice president of investment strategy at E-Trade wrote in an email.
“That said, our historically low unemployment rate hasn’t moved, and even though the number came in low we’re still creating jobs, which supports the case that the economy is still expanding,” he added. “So the Fed will have to walk a really thin line.”
“Stock indices were headed for weekly gains, as expectations that the US Federal Reserve and other central banks around the world would soon cut interest rates to counter the damaging impact of rising trade tensions lifted sentiment,” wrote Raffi Boyadjian, senior investment analyst at XM. “Traders were also hopeful that US and Mexican officials will be able to resolve the issue of illegal migration across the two countries’ border.”
Barnes & Noble Inc. BKS, +12.16% shares could be in focus Friday, after the bookseller confirmed it will be acquired hedge fund Elliot Management Corp., for $6.50 per share, in a deal valued at $683 million, including the assumption of debt. The stock rose 10.8% Friday.
Shares of Zoom Video Communications Inc. ZM, +20.01% were up 21.7% Friday morning, after the firm announced better-than-expected earnings Thursday evening.
The yield on the 10-year Treasury note TMUBMUSD10Y, -2.21% retreated nearly .03 percentage point to 2.088%.
Asian stocks closed higher Friday, with Japan’s Nikkei 225 rising 0.5% and South Korea’s Kopsi advancing 0.2%. Markets in China were closed for a holiday. In Europe, stocks were on the rise, with the Stoxx Europe 600 SXXP, +0.93% adding 0.8%.
Crude oil CLN19, +2.19% was on the rise for the second-straight session, while the price of gold GCN19, +0.30% edged higher. The U.S. dollar DXY, -0.54% meanwhile, fell 0.4% relative to its peers.
People abstain from meat for plenty of reasons—ethical, dietary, religious—and for many, this choice is a serious one. That makes this news of a Burger King in Brooklyn, which admits to serving regular beef burgers to customers who’d ordered vegan Impossible Whoppers, more than a mere mix-up.
Eater reports the Burger King at 736 Broadway in Brooklyn has for weeks been filling Seamless delivery orders for Impossible Whoppers with regular Whoppers, asking the Seamless driver to inform the customer of the switch. But according to customers who spoke to Eater, drivers had not informed them of the substitution, and their receipts read “Impossible Whopper.” The Impossible Whopper is only available in select cities, and NYC is not yet one of them, despite what the Seamless version of BK’s menu advertised.
“We have recently become aware that due to a technology error, one of our franchisees incorrectly listed the Impossible Whopper as a menu item available at some New York-area restaurants through two third-party delivery platforms,” a Burger King spokesperson told The Takeout. “The issue has been corrected and the item is no longer listed as an option until we officially bring the Impossible Whopper to New York. We apologize for any confusion this has caused. Any guests who ordered an Impossible Whopper through delivery in the New York area and have any questions may call 866-394-2493.”
The Seamless page has since removed the Impossible Whopper, which had reportedly been listed since May 20.
It’s reasonable to believe some customers may not have noticed the burger substitution, as Impossible Foods boasts its burger “delivers all the flavor, aroma and beefiness of meat from cows.” This video sheds some light on just how much Burger King has touted the “real” meatiness of its Impossible Whoppers.
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The numbers: The U.S. created just 75,000 new jobs in May and employment gains earlier in the spring were scaled back, an ominous turn that points to a slowing economy and is likely to put more pressure on the Federal Reserve to cut interest rates.
The meager gains in May fell far short of the 185,000 MarketWatch forecast, but how stocks react Friday will likely depend on whether Wall Street thinks the Fed will act soon.
Premarket trading pointed to a higher opening for the stock market DJIA, +1.27% SPX, +1.34% while the 10-year Treasury yield TMUBMUSD10Y, -2.70% fell to 2.06%.
Hiring slackened off in almost every key segment of the economy and employment fell in retail and government. The pace of wage growth over the past year also slowed.
The news was not all bad. The unemployment rate clung to a 49-year low of 3.6% and a broader measure of joblessness that includes part-time workers dipped to the lowest level in 19 years.
Part of the reason hiring may have tapered off, economists say, is a growing shortage of skilled labor in the tightest labor market in decades. Many companies say they can’t find people to fill a large number of open jobs.
Read: Weak unions, globalization not to blame for shrinking slice of income pie for workers
What happened: Professional-oriented companies added 33,000 jobs, hotels and restaurants boosted payrolls by 26,000 and health-care providers hired 16,000 workers. These have been the three fastest-growing areas of the economy since an expansion began 10 years ago.
Employment was weak everywhere else. Construction companies hired just 4,000 new workers while retailers shed jobs for the fourth straight month.
Government also cut 15,000 jobs, failing to get a boost from temporary Census hiring.
Employment gains for April and March were also reduced by a combined 75,000, revised figures show.
The economy has created an average of 151,000 new jobs in the past three months, down from as high as 238,000 at the start of the year.
The slowdown in hiring and shift toward lower paying jobs in social services and hospitality appears to have put a halt to broad wage gains.
Although the average wage paid to American workers rose 6 cents to $27.83 an hour, the increase over the past 12 months slowed to 3.1% from 3.2%. It peaked at 3.4% earlier this year.
Big picture: The pace of hiring has slowed since the end of last year, and even after the poor May report, the labor market is still healthier than it’s been in several decades.
Still, the economy appears to have been shaken by festering trade tensions with China and a slowdown in the key manufacturing sector. If the labor market or other indicators shows further weakness, the Fed would almost certainly cut interest rates to help shore up the economy.
Read: Economy grew at ‘moderate pace’ in late spring, more upbeat Fed Beige Book finds
What they are saying?: “If the Fed wants evidence the trade dispute has rattled business confidence enough to cause economic problems,” chief economist Chris Low of FTN Financial wrote, weak job gains in May and “fading wage pressures should do the trick.”
“The cracks that had been showing in other data on the economy became very apparent in the May jobs data. Unemployment held steady at 3.6% — still near a half-century low — but job creation stalled,” said Jim Baird, chief investor officer at Plante Moran Financial Advisors.
“Today’s 75,000 jobs number could mark the beginning of the end of the strong jobs expansion, or it could be an outlier. We’ll have to see another couple months of jobs numbers before we can establish hiring is slowing down,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Market reaction: The Dow Jones Industrial Average and S&P 500 index had risen for three straight sessions after Fed Chairman Jerome Powell indicated an openness to a cut in U.S. interest rates.
Read: Fed’s Bullard says FOMC may have to cut rates soon due to trade wars, low inflation
Shares of Beyond Meat surged 27% in morning trading Friday after analysts raised their price targets following the company's first quarterly report since going public.
The company's stock, which has a market value of $7.4 billion, is up more than 400% since it went public at the beginning of May.
Credit Suisse analyst Robert Moskow's new price target of $125, up from a previous target of $70 per share, is the closest to the stock's price of $126.30 following its latest surge. Beyond priced its initial public offering at $25 per share.
The company said Thursday that it expects annual revenue to exceed $210 million, more than doubling last year's net sales, but Moskow's estimates put 2019 sales at $224 million.
"Inbound interest from restaurant chains has increased following the tremendously positive publicity during the Beyond Meat IPO," he wrote in a note.
Executives told analysts on the conference call that they only include post-trial distribution to restaurants in the company's forecasts.
J.P. Morgan analyst Ken Goldman estimates that Tim Hortons, which is currently testing a breakfast sandwich made with the Beyond Sausage, could add nearly $23 million in revenue this year. Goldman raised his price target to $120 from $97.
"Importantly, when discussing guidance, CEO Ethan Brown said, 'We're being very conservative' and let investors know that no foodservice customers are included in guidance until they are past the testing stage," Goldman wrote.
Goldman Sachs analyst Adam Samuelson raised his price target to $76 from $67, and Jefferies analyst Kevin Grundy raised his price target to $105 per share from $85.
Beyond Meat reported first-quarter revenue of $40.2 million, up 215% from a year ago, and a net loss of 14 cents per share on a pro forma basis.
The numbers: The U.S. created just 75,000 new jobs in May and employment gains earlier in the spring were scaled back, an ominous turn that points to a slowing economy and is likely to put more pressure on the Federal Reserve to cut interest rates.
The meager gains in May fell far short of the 185,000 MarketWatch forecast, but how stocks react Friday will likely depend on whether Wall Street thinks the Fed will act soon.
Premarket trading pointed to a higher opening for the stock market DJIA, +0.71% SPX, +0.61% while the 10-year Treasury yield TMUBMUSD10Y, -2.70% fell to 2.06%.
Hiring slackened off in almost every key segment of the economy and employment fell in retail and government. The pace of wage growth over the past year also slowed.
The news was not all bad. The unemployment rate clung to a 49-year low of 3.6% and a broader measure of joblessness that includes part-time workers dipped to the lowest level in 19 years.
Part of the reason hiring may have tapered off, economists say, is a growing shortage of skilled labor in the tightest labor market in decades. Many companies say they can’t find people to fill a large number of open jobs.
Read: Weak unions, globalization not to blame for shrinking slice of income pie for workers
What happened: Professional-oriented companies added 33,000 jobs, hotels and restaurants boosted payrolls by 26,000 and health-care providers hired 16,000 workers. These have been the three fastest-growing areas of the economy since an expansion began 10 years ago.
Employment was weak everywhere else. Construction companies hired just 4,000 new workers while retailers shed jobs for the fourth straight month.
Government also cut 15,000 jobs, failing to get a boost from temporary Census hiring.
Employment gains for April and March were also reduced by a combined 75,000, revised figures show.
The economy has created an average of 151,000 new jobs in the past three months, down from as high as 238,000 at the start of the year.
The slowdown in hiring and shift toward lower paying jobs in social services and hospitality appears to have put a halt to broad wage gains.
Although the average wage paid to American workers rose 6 cents to $27.83 an hour, the increase over the past 12 months slowed to 3.1% from 3.2%. It peaked at 3.4% earlier this year.
Big picture: The pace of hiring has slowed since the end of last year, and even after the poor May report, the labor market is still healthier than it’s been in several decades.
Still, the economy appears to have been shaken by festering trade tensions with China and a slowdown in the key manufacturing sector. If the labor market or other indicators shows further weakness, the Fed would almost certainly cut interest rates to help shore up the economy.
Read: Economy grew at ‘moderate pace’ in late spring, more upbeat Fed Beige Book finds
What they are saying?: “If the Fed wants evidence the trade dispute has rattled business confidence enough to cause economic problems,” chief economist Chris Low of FTN Financial wrote, weak job gains in May and “fading wage pressures should do the trick.”
“The cracks that had been showing in other data on the economy became very apparent in the May jobs data. Unemployment held steady at 3.6% — still near a half-century low — but job creation stalled,” said Jim Baird, chief investor officer at Plante Moran Financial Advisors.
“Today’s 75,000 jobs number could mark the beginning of the end of the strong jobs expansion, or it could be an outlier. We’ll have to see another couple months of jobs numbers before we can establish hiring is slowing down,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Market reaction: The Dow Jones Industrial Average and S&P 500 had risen for three straight sessions after Fed Chairman Jerome Powell indicated an openness to a cut in U.S. interest rates.
Read: Fed’s Bullard says FOMC may have to cut rates soon due to trade wars, low inflation
