Wall Street Breakfast: Job Market Resilience

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Job market resilience

The domestic labor market remains tight, with April’s nonfarm payrolls report expected to show that more than 200K jobs were added to the U.S. economy for the fourth straight month. The unemployment rate is also forecast to remain at 3.8%, resulting in the 27th consecutive month that joblessness has stayed under 4% and marking the longest such stretch since the 1960s. It’s a peculiar dynamic, as interest rates have remained relatively high over much of the past two years, and conventional thinking has suggested that this would have made some dent in the job market by now.

Are rates high enough? Jay Powell says they are and has telegraphed that the Fed’s next move will be down and not up. That’s despite inflation remaining sticky around the 3% level and persistent price pressures in the first quarter of the year. Those forces have also led many investors to consider wage growth to be the most important indicator in today’s NFP report, which will be released at 8:30 AM ET.

Average hourly earnings likely rose 0.3% M/M in April, unchanged from March. On a Y/Y basis, a 4.0% increase is expected (compared with 4.1% in the previous month), but higher-than-expected wage increases may fan the fears of resurgent inflation. The labor force participation rate, which measures the share of the working-age population employed or seeking employment, is also anticipated to stay unchanged at 62.7%.

Commentary: SA analyst Damir Tokic will be focusing on changes in temporary jobs, which is a leading indicator of a recession, as well as declines in full-time jobs and increases in part-time ones. A rise in immigration is one reason why the U.S. economy may not be in a recession now, while excess savings from COVID, although largely depleted, may also still be playing a part. “Thus, in my view, these variables have provided only a temporary boost to the economy,” he writes, explaining what effects those might have on the stock market. (29 comments)

Record buyback

Apple (AAPL) shares jumped 6% AH to $183.46/share on Thursday as the tech giant’s Q2 results were better than expected despite iPhone fears in China. Sales weakness was also seen in categories including the iPad, Mac, and Wearables, but investors cheered its updated capital return plan that added a record $110B to its buyback program and raised its quarterly dividend by 4% to $0.25 per share. “We view Apple’s continued employment of generous share buybacks as a critical tool for the stock in weathering the near-term headwinds facing its underlying fundamental outlook,” said Investing Group Leader Livy Investment Research. (196 comments)

Gamblification

Dave & Buster’s (PLAY) has unveiled plans to let customers 18 and older bet on arcade games, but the move has raised concerns over potential addiction risks among youth. D&B will integrate Lucra’s gamification software into its app, which will allow loyalty members to bet $5-$10 on arcade games such as Skee-Ball and Hot Shots. “Providing ‘social’ gambling at youth-oriented locations like Dave & Buster’s raises concerns about youth exposure to and participation in gambling,” declared Keith Whyte, executive director of the National Council on Problem Gambling. (1 comment)

Another bid

Sony (SONY) and Apollo Global (APO) have reportedly gotten a bit more formal in their approach for Paramount Global (PARA, PARAA) via a letter detailing their all-cash $26B offer. Paramount shares, which have been volatile of late, were back in the green following the news. The nonbinding offer marks a starting point for more formal talks as the exclusive negotiating window Skydance Media has to discuss its merger proposal expires later today. Skydance had sweetened its bid, offering some concessions to frustrated Paramount shareholders, although there still appears to be a gap between the companies. (140 comments)

Today’s Markets

In Asia, Japan closed. Hong Kong +1.5%. China closed. India -1%.

In Europe, at midday, London +0.4%. Paris +0.6%. Frankfurt +0.4%.

Futures at 7:00, Dow +0.8%. S&P +0.4%. Nasdaq +0.6%. Crude +0.3% to $79.17. Gold -0.1% at $2,307.10. Bitcoin +1.4% to $59,015.

Ten-year Treasury Yield -1 bps to 4.58%.