In fact, U.S. stock futures soared immediately upon the release of the latest jobs report. That’s good news given that nonfarm payrolls saw greater-than-expected gains in May. That report was expected to show the economy adding 139,000 jobs, more than the Dow Jones estimate of 125,000. This increase was just below the revised, downwardly April growth of 147,000 jobs. Even with this good news, the unemployment rate held steady at 4.2%.
The recently released September jobs report presents a different, more concerning picture. Unemployment claims for last week soared to 247,000, well above economists’ predictions of 236,000 per Dow Jones. While new claims remain historically low, this week’s spike in claims may be an early indicator of more widespread labor market distress over the coming weeks.
The ISM (Institute for Supply Management) services index played a role in the mixed economic picture. The index fell to 49.9% in May, below the forecast for 52.1%. A decline in the index below 50% signifies that the services sector is contracting, an important part of the composite of sectors that make up the overall economy.
In reaction to all of these economic indicators, the Dow Jones Industrial Average futures soared 296 points, or 0.7%. Clearly, investor optimism was high and the jobs report was the big driver. Warning signs from rising unemployment claims and the ISM services index continue to haunt us.
“Today’s jobs report will not be viewed as a call to action for the Fed to cut rates” – Eric Merlis
The stock market’s investors’ immediate response featured particularly sharp drops in big tech and automotive manufacturers after their earnings revisions and earnings announcements. Lululemon lost almost a quarter of its value with a crippling 22% extension decline. The company recently slashed its full-year earnings guidance and cited a “dynamic macroenvironment” as the explanation. This announcement sent shockwaves among investors as doubt began to grow surrounding the company’s ability to adapt to today’s challenging market landscape.
As one would imagine, Tesla took a big hit, down 14%. The drop off came on the heels of CEO Elon Musk’s ugly Twitter war with then-President Donald Trump. This sudden war would have understandably shaken investors. They’re more concerned with how Musk’s leadership is impacting Tesla’s stock price.
DocuSign’s stock slumped 17% last month after the company missed billings growth projections for the first quarter. Investors punished DocuSign’s stock in response to these earnings results, worried about DocuSign’s long-term revenue sources and DocuSign’s position in the market.
That was a big misfire for Broadcom, which tumbled almost 3% after disappointing free cash flow projections for the second quarter sent down shares. The company announced a free cash flow of $6.41 billion. This figure was well below the $6.98 billion consensus estimate from FactSet. Investors were understandably cautious as they tried to judge Broadcom’s financial overall results, looking ahead growth potential.
As markets adjust to these mixed signals from various sectors, analysts are closely watching how these developments will influence future economic policy decisions, particularly regarding interest rates and monetary policy.