After days of turmoil in US regional bank stocks, calm is returning to markets as investors scoop up beaten-down bargains.
The focus on Friday is shifting to the US jobs report and speculation that the Federal Reserve might start lowering interest rates in response to tighter credit conditions. Swap contracts are now showing around one-in-two odds of a cut as soon as July.
PacWest Bancorp jumped as much as 26% and Western Alliance Bancorp added 15% in premarket trading. Both companies plunged this week, dragging the S&P 500 down for four straight days, on fears about mounting stress in the financial system.
Strong earnings also lifted investor sentiment. Apple Inc. rose after iPhone sales were higher than expected. Adidas AG rallied in Europe, lifting the Stoxx 600 Index, as the company ramps up production of classic Samba, Gazelle and Campus sneakers to serve high demand.
Futures contracts on the S&P 500 and the Nasdaq 100 climbed 0.6%. The Bloomberg dollar index trimmed a retreat, but remained on course for its worst week in more than a month. Treasury yields ticked higher.
The monthly Labor Department report will give Fed Chairman Jerome Powell the latest reading on the job market’s resilience. Economists forecast that employers scaled back hiring in April, adding 185 000 jobs, and that the unemployment rate ticked up slightly from historically low levels last month.
Gordon Shannon, portfolio manager at TwentyFour Asset Management, predicts a jobs print below 150 000. “That’s going to cause a rally in risk assets as that further feeds into the idea that Powell is data-driven and therefore going to pivot soon,” he said in an interview with Bloomberg Television.
Gold and tech
While the Fed may have signaled this week its willingness to pause rate hikes, Bank of America Corp.’s Michael Hartnett said it’s not yet time to buy equities as outflows accelerate amid elevated inflation and recession fears. Redemptions from global stock funds reached $6.6 billion in the week through May 3 — the most in more than two months, according to a note from the bank citing EPFR Global data.
A “new structural bull market requires big Fed easing,” which in turn needs a “big recession,” Hartnett said.
To protect themselves against that threat of a downturn, investors are likely to favor gold and technology stocks as those bets are expected to provide a buffer, strategists at JPMorgan Chase & Co. said. “The US banking crisis has increased the demand for gold as a proxy for lower real rates as well as a hedge against a ‘catastrophic scenario,’” strategists including Nikolaos Panigirtzoglou and Mika Inkinen wrote in a note.
In other premarket moves, DraftKings Inc. jumped after the sports-betting company raised its revenue guidance for the full year. Coinbase Global Inc. climbed as the biggest US digital-asset trading platform’s quarterly revenue topped estimates. Carvana Co. surged as much as 37% following earnings from the online second-hand car retailer that beat estimates.
Elsewhere in markets, oil rose by more than 2% in New York as traders bet that the recent selloff may been excessive. Prices are still down sharply this week because of fears that the US economy is sliding into a recession.
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.6% as of 6:56 a.m. New York time
- Nasdaq 100 futures rose 0.6%
- Futures on the Dow Jones Industrial Average rose 0.4%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.1024
- The British pound rose 0.3% to $1.2613
- The Japanese yen was little changed at 134.21 per dollar
Cryptocurrencies
- Bitcoin rose 0.8% to $29,116.96
- Ether rose 1.4% to $1,904.37
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.40%
- Germany’s 10-year yield advanced eight basis points to 2.27%
- Britain’s 10-year yield advanced 10 basis points to 3.75%
Commodities
- West Texas Intermediate crude rose 2.5% to $70.26 a barrel
- Gold futures fell 0.5% to $2 045.10 an ounce
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