Market Update: Tech Stocks Lead the Charge as Investors Await Friday’s Jobs Report

As the world’s largest technology companies continue to drive stocks higher, investors are gearing up for Friday’s highly anticipated jobs report. The data release is expected to provide valuable insights into the state of the US economy and the potential impact on interest rates.

Tech Stocks Surge

In recent days, tech stocks have been leading the charge, with companies like Apple and Microsoft experiencing significant gains. This surge in tech stocks has contributed to a broader market rally, with the S&P 500 index reaching new highs.

Investors on Edge Ahead of Jobs Report

With Friday’s jobs report just around the corner, investors are increasingly cautious. A survey conducted by 22V Research found that 30% of polled investors believe the report will be "risk-on," while 27% expect a "risk-off" reaction. Meanwhile, 43% said they anticipate a "mixed/negligible" response.

Average Hourly Earnings Take Center Stage

Among labor indicators, average hourly earnings are expected to take center stage. According to the survey, investors will be paying close attention to this metric, which is seen as a key indicator of wage growth and inflation.

Markets Prepare for Potential Volatility

The options market is betting on significant stock price swings following Friday’s jobs report. The S&P 500 is expected to move 1.2% in either direction after the release, based on at-the-money puts and calls expiring Friday. This implies a large implied swing ahead of an employment report since March 2023.

Fed Decision: Holding Rates

On Wednesday, the Federal Reserve announced its decision to hold interest rates steady. The length of this pause now reaches 280 days, which is the second-longest on record according to Ryan Grabinski at Strategas Securities. While some analysts believe that longer pauses have been constructive for equities, others are warning that a Fed cut may not necessarily be beneficial.

Soft Landing or Rate Cuts?

Bank of America Corp.’s Savita Subramanian believes that a sturdy economy will sustain the bull-market run in US stocks even without Fed rate cuts. She is optimistic about the market environment and expects better growth ahead, with higher rates and inflation still present.

Hedge Funds Turn Defensive

As uncertainty around geopolitics and interest rates grows, hedge funds are becoming increasingly defensive. Positioning data shows that hedge fund managers have added defensive equity positions to their portfolio in April at the fastest pace in eight months, while still being net sellers of global stocks.

Conclusion

The jobs report is set to be a significant event for investors, with potential implications for interest rates and market volatility. While some analysts are optimistic about the prospects for the US economy, others are warning that markets may not react favorably to weaker data. As always, caution and vigilance will be essential in navigating the complex landscape ahead.

Sources

• Bloomberg.com
• Strategas Securities
• Bank of America Corp.
• Goldman Sachs Group Inc.
• Citigroup Inc.

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